Dataquest: First ever drop in cell phone shipments

Due to a weak European market, the number of worldwide cell phone shipments dropped for the first time in mobile phone history, according to research firm Dataquest Inc., a unit of Gartner Inc.

Handset makers delivered about 90 million handsets to the channel in the second quarter of this year, compared to about 98 million in the same period last year, according to Dataquest.

“This is the first year-on-year drop we’ve seen in history,” said Ben Wood, senior analyst mobile communications with Dataquest.

A weak European market, because of lower subsidies on handsets with prepaid service and large inventories in the channel, is the thorn in the side of the handset makers, according to Wood.

“Europe is where the weakness is. The Asia/Pacific market is full of potential and the United States is relatively stable. The general economic downturn doesn’t seem to affect handset sales there much,” said Wood.

Handset makers aren’t just waiting for Europeans to start buying new phones, Europeans are also waiting for handset makers to finally come out with phones that support GPRS (General Packet Radio Service), Wood noted. GPRS allows faster, packet-switched data connections.

“Lots of people are waiting for a GPRS phone. That doesn’t necessarily mean that they will use GPRS services once they get a phone, but they will be up to date,” said Wood.

Despite a 0.5 per cent drop in market share compared to the first quarter, Nokia Corp. continues to reign with a market share of 34.8 per cent, compared to 27.5 per cent in the second quarter last year, according to Dataquest.

“A half per cent (decline) in this market with the lead Nokia has over the competition is not a doom and gloom story. On a long-term basis, the growth Nokia has shown is phenomenal,” said Wood.

Last year was a record year for handset makers, with about 405 million handsets sold. This year most manufactures expect little or modest volume growth compared to 2000.

The market is reshaping, according to Wood.

“We expect continued growth in the second half of the year, but clearly the market is changing. We are moving from a market focused on new subscribers and new handsets, to a more mature market in Europe where people are replacing handsets,” he said.

Table: Worldwide market shares of cell phone manufacturers (percent)