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3 Key Trends in Mobile Phone Market

The worldwide phone market grew again in the second quarter, but the dividing line between what's universally considered practical (low-end feature phones) and what's hot (higher-end smartphones) is becoming more obvious.

{complink 7014|IDC} recently reported the worldwide mobile phone market grew 11.3 percent year-over-year in the second quarter of 2011. Sure, that's down from IDC's anticipated 13.3 percent quarterly target and the 16.8 percent growth recorded in the first quarter, but 11.3 percent doesn't seem too shabby during a time when the US and euro-area economies are floundering through a politically charged debt crisis, high unemployment, and other malaise .

Mobile makers still managed to ship 365.4 million units in the second quarter, 37 million more than the comparable year-ago period. The trend that really caught my eye, though, was this one: The second quarter booked a weaker feature phone market, which declined for the first time since the third quarter of 2009, noted IDC. The firm doesn't expect things to get much better in the low-end, low-cost feature phone segment either; feature phone shipment growth likely won't exceed 1.1 percent in any year forecasted by IDC, according to the report.

Then, there was this report in The Wall Street Journal, which reinforced what we all generally suspected: Citing data from market research firm Strategy Analytics, The Journal noted Apple Inc. and Samsung Electronics Co. overtook Nokia Corp., the longtime leader, in the global smartphone market during the second quarter. According to the article, Apple's share of the smartphone market rose to 18.5 percent in the second quarter from 13.5 percent a year earlier. Samsung's smartphone market share jumped to 17.5 percent from 5 percent. And, Nokia… well, the once-mighty leader saw its global market share tumble to 15.2 percent from 38.1 percent a year earlier.

While it's still anyone's guess how this will all shake out and whether the phone makers lower in the rankings could do anything to break into what's shaping up to be a fierce two-horse race, there are a few trends to keep a watchful eye on. These include:

  • Another mobile phone inflection point has arrived.
  • It seems pretty certain that the feature phone is definitely on its way out, at least in North America, Western Europe, and parts of Asia. Arguably, though, it could still have some end-of-life legs in the developing world where the variety of low-cost, pay-as-you-go phones on display at local markets and in commercial centers is still appealing. But, as inventory cycles through and prices drop, that will be less evident. Soon enough, that crossover will happen in emerging markets, too.

  • Recent inventory clearing means the channel is getting ready for even more smartphones.
  • Speaking of inventory, IDC found that regional inventory clearing softened second-quarter demand. For example, the “traditionally slow second quarter in Asia/Pacific was exacerbated by Nokia's channel inventory corrections in China,” where locals went giddy for Apple's iPhone 4. Similarly, in Western Europe, the feature phone market declined and smartphone shipment growth slowed, because phone makers and carriers reduced inventories in anticipation of new product launches this quarter: Move over feature phones; smartphones need more shelf space.

  • Duh! New features on smartphones are more appealing than old-style feature phones.
  • Android-based devices from Samsung, Motorola, HTC, and LG are extending their lead in the United States and won top-spot favor from users in Canada, IDC said. Latin America saw similar demand, albeit for lower-priced smartphones. What's hot there? The social networking capabilities available on the new phones. But of course: Where would we be if we couldn't Tweet or Facebook our whole lives every second of the day?

I guess it's just a matter of time until the feature phone goes the way of the dinosaur, and, until the next great thing comes out, smartphones will rule the world. The question now is how quickly the supply chain will evolve with the market.

24 comments on “3 Key Trends in Mobile Phone Market

  1. FLYINGSCOT
    August 2, 2011

    I agree with you that smart phones will dominate the future.  This is mainly being driven by social networking as people now prefer to communicate through Facebook, Twitter, SMS, email etc. compared to talking to someone on the phone. Constant cell phone use is quickly becoming a “way of life” for many people as it offers social networking, phone, camera, music etc. capabilities in one convenient tool.  One just needs to look around and monitor how people clutch on to their phones which reminds me of an old addage……”it is not as if it (the cell phone) were a matter of life or death or anything…..it is more important than that”. 

  2. Ariella
    August 2, 2011

    Yesterday I read that a poll found a significant number of people who considered their smart phones to be extensions of their brains or of their bodies because they use it for so many different activities.  The standard phone that just calls is simply a communication device, not something people regard as completely essential as they do the device that stores their calendar, notes, contacts, emails, books, and more. 

  3. DataCrunch
    August 2, 2011

    One bright side for Nokia is that the company still retains the number one position in mobile phone sales with a 24.2% market share and 88.5 million devices sold.    Perhaps there strategy will be to go after emerging markets or even underdeveloped countries and offer low-cost, low-end devices until they come out with their new Win-Nok line up. 

  4. Eldredge
    August 2, 2011

    If accurate, the market share drop for Nokia is alarming. It would be interesting to kow if the market itself has grown significanlty enough to make the financail impact for Nokia less than these numbers would imply, and if they were anticipating it.

  5. jbond
    August 3, 2011

    It was only a matter of time before Smartphone’s ruled the market and made the feature phone extinct. It was bad enough seeing elementary kids with cell phones, but know you see them with Smartphone’s. Personally I think that is ridiculous, but I guess it is great news for the manufacturers and the service providers.

    Even being aware of Nokia's problems over the last year, I was surprised at the numbers being so drastically different over the previous year. Their percentage isn't bad when you compare it to Apple and Samsung, but with uncertainty their sales and market share may drop even more.

     

  6. Jennifer Baljko
    August 3, 2011

    Thanks for the comments, everyone. I also found the Nokia numbers quite shocking and wanted to see if other reports pointed to a similar drop-off. If I have a few minutes later in the week, I'll try to scour up a few other sources.

    Like Dave Sasson  points out “ One bright side for Nokia is that the company still retains the number one position in mobile phone sales with a 24.2% market share and 88.5 million devices sold.” And I think you're right, for the near-term emerging markets or even underdeveloped countries will surely be a sweet spot.

     

  7. t.alex
    August 3, 2011

    Nokia still dominates the emerging markets. However, based on the recent news, it seems Android is slowly taking over. Android even surpases Apple iPhone recently.

  8. eemom
    August 3, 2011

    I was equally surprised by Nokia's market share drop.  I realize that smartphones are more versatile and therefore more desirable.  However, it is becoming more and more difficult to purchase a feature phone.  Choices and variety are limited.  Let's not forget that pre-teens and teens all carry cell phones.  Parents are adding children as young as 9 or 10 to their cell phone plans.  These children do not need a smart phone.  They simply need a “texting device”.  In obtaining phones for my teenagers, I had to obtain a “data plan” from verizon – albeit discounted.  I do not want my children to have data plans.  I simply want them to be connected to their friends.  It is frustrating that the choices for simple mobile phones are so limited.  It is a market untapped and is being left behind.

  9. Ariella
    August 3, 2011

    I dropped into a Radio Shack this week and saw that there are some very inexpensive phones sold for those who just want a phone for emergency contact with a “pay as you go” plan that does not tie you into a long term contract. Some models were $79 but included a $50 calling credit, and others were only $15.

  10. FLYINGSCOT
    August 3, 2011

    A fun informal survey to run if are in a crowded place like an airport lounge or a downtown mall is to do a Bluetooth scan for other devices.  One can then see what other types of mobiles are out there (hey I did not say it was a scientific experiment or anything).  Last week in a French airport I scanned and the overwhelming phone was Nokia followed not too closely by Blackberry.  I wonder what a shopping center in Beijing or downtown Manhattan would tell us?  That said, I am not too sure Nokia has a great strategy at the moment for either smart phones (vs Apple or RIM) or for the feature phones (vs myriad Asian bricks).

  11. Nemos
    August 3, 2011

    It is more than clear that the smatphones it is more attractive than the old fashioned feature phone. I surprised also with the fact that Nokia lost 23% from the global market share.

    The battle still exists : Apple VS Android phones.

  12. eemom
    August 3, 2011

    I think those pre-paid phones are great for Senior Citizens who reject technology but want to have something in their car for emergencies.  However, they are not an option for teens who need an unlimited texting plan for their phones.  There should be a low end cell phone that pretty much acts as a texting device.  I am sure parents with children that incessantly badger them for a cell phone would find such a device useful.

  13. Ariella
    August 3, 2011

    For something like that,you'd be best off with a family plan that includes unlimited texting. Sometimes cell phone service providers offer to send you a free phone or one with a large rebate on it when you upgrade your plan or add a line. Personally, I don't text, but the boss at the camp my daughter works at wants texts sent to her to inform her when the bus route has ended. My daughter found it much eaiser to text on a blackberry than on my old Nokia phone.

  14. eemom
    August 3, 2011

    I agree and I do have a family plan.  However, when the kids need to upgrade their phone, their is now an upcharge for data that did not exist before. 

  15. Daniel
    August 4, 2011

    Jennifer, Mobile market has a huge potential of growth because mobile becomes a part of our day to day life. More than half of the world population has atleast a basic mobile phone and among them half of them have more than 2 mobile phones. This implies that still half of the world population needs atleast a mobile phone. So we can expect a huge sales turn over in coming years. Most of the peoples are waiting for the market stabilization in high end phone segment (Smart phone segment) for up gradation. Since many models are releasing day by day to market, most of the peoples are confused about which model they have to prefer. So surly there may be chance for similar rate of growth in smart phone segment also.

  16. JADEN
    August 15, 2011

    There is a notable reversal of fortune for the feature phones which used to be the bread & butter devices for everyone.  The use of smartphones now grow daily, it was used to be for executives now it is being adopted by the masses.  Majority of new phones in the market now are smartphones because people use it more than feature phones.

  17. Anne
    August 15, 2011

    The trend in Mobile Phones is like Television trend, it is like going from old black and white television to the new LED TV.

  18. Tim Votapka
    August 15, 2011

    There's no doubt the mobile phone market is the standard for communications. Any data as to how this has impacted or will affect conventional landline installations or useage?

  19. itguyphil
    August 15, 2011

    Tvotapka,

    I do not have hard data to backup this assumption but I feel like the mobile transition for communication will follow the same trend as the USPS-Email case. Traditional land lines will be around but most likely for those NOT using mobile phones and emergency backup purposes. Especially as the cost of mobile subscriptions continue to decrease.

  20. hwong
    August 19, 2011

    We will all need to be very careful with our mobile phones as it emits radiation, albeit tiny. 

  21. itguyphil
    August 19, 2011

    hwong,

    This is true but many debates are going on now about whether that amount of radiation exposure is actually harmful to us. Some say it is no more harmful than standing in the sun and absorbing the UV rays. I guess we will see what further research will uncover.

  22. Anand
    August 20, 2011

    I guess we will see what further research will uncover.

    @pocharle, I am not sure when this research will end. So it would be better to prepare for the worst and educate people about probable side effects of mobile radation. The least that user can do is choose mobiles with low SAR.

  23. itguyphil
    August 20, 2011

    anandvy,

    Where can one find this device-based information?

  24. Anand
    August 20, 2011

    @pocharle, you can find the device based SAR rating here http://www.techfreakstuff.com

    Usually its been observed that Samsungs handset has low SAR so I am guessing they are more safe.

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