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Handset channel will restock in Q3, but recovery will wait to 2010

The slump in the cellphone industry towards the end of last year resulted in a 4.6% decline for the fourth quarter, dragging year-on-year growth for the whole of 2008 down into single figures, at around 6%. This is the calculation from research group Gartner, which confirms most of the earlier estimates from manufacturers and other analysts.

The slump in the cellphone industry towards the end of last year resulted in a 4.6% decline for the fourth quarter, dragging year-on-year growth for the whole of 2008 down into single figures, at around 6%. This is the calculation from research group Gartner, which confirms most of the earlier estimates from manufacturers and other analysts.

Worldwide, sales to end users totalled 314.7m units in the fourth quarter, and 1.22bn units for the full year. “Mobile phones have traditionally been one of consumers’ preferred presents for Christmas. However, in the fourth quarter of 2008 consumers were concerned about taking on the contract associated with the most attractive products in the market,” commented mobile devices research director Carolina Milanesi. This trend, in developed and emerging markets, led to the lowest quarter-on-quarter growth, at 2%, ever recorded in a Q4.

Sales into the channel were 297.3m in the period, while sales to users were 314.7m – the biggest difference recorded since Gartner started measuring the market in 2001, and reflecting inventory reduction schemes by the channel, driven by low consumer confidence and the retailers’ desire to reduce their upfront capex. “Efforts to reduce inventory will intensify in the first quarter of 2009 and continue into the second quarter. In the second half of 2009, the channel will have to start restocking,” said Milanesi. However, ‘real’ market recovery will not happen until 2010, she believes, when demand will stabilize around the first quarter.

In market share terms, Gartner’s estimates for Q4 sales to end users show Nokia selling 118.8m units, giving it a share of 37.7%, down from 40.4% for Q4 of 2007. It was followed by Samsung on 57.5m units, with sharply increased market share, up from 13.4% to 18.3%. LG also increased share, from 7.1% to 8.9%, on sales of 28.1m phones; Sony Ericsson slipped from 9% to 7.5%, on 23.5m units; Motorola was down from 11.9% to 6.9% with sales of 21.7m devices; while the share held by ‘others’ such as Apple, RIM, Palm and the Asian low cost manufacturers rose from 18.2% to 20.7%, or 65m phones. The figures exclude ODM to OEM sales.