Mobile Phone Shipments Dip In First Quarter

The first quarter's decline was especially sharp this year because of weak demand and lack of credit, but smartphone growth continues to defy the recession.

Palm Pre smartphone

Palm Pre smartphone
(click for larger image)

The global economic slowdown has taken a chunk out of the mobile market, as cell phone shipments dipped almost 16% for the first quarter of 2009, according to a report from IDC.

The report said the first quarter normally sees lower shipments because cell phone manufacturers like to release popular handsets during the holiday season. But this year's first quarter saw an especially sharp decline caused by weak demand and lack of credit for vendors and consumers in the wake of the recession.

"The market continues to adapt to the new economic reality with both vendors and retailers exercising caution to remain profitable," senior research analyst Ramon Llamas said in a statement. "In some cases, this has meant holding less inventory, or even reducing head count. Fortunately, new features and demand for phones will help the market resist the financial pressure. We expect to see further year-over-year declines worldwide, even as some regions show signs of improvement."

While the overall market dipped, the report said smartphones continued to grow 4% year over year. Many industry watchers expect smartphones to defy the recession, and the next few quarters will see the release of many highly anticipated handsets like the Palm Pre, Samsung's first Android phone, HTC's updates to its "Touch" line, and possibly a new iPhone.

Nokia was boosted by the success of the touch-screen 5800 XpressMusic, and the report said it's well positioned with the upcoming launch of the Ovi Store, as well as the expansion of its Comes With Music service. Samsung's mobile division posted double-digit profits last quarter, and IDC expects it to continue its success over the next couple quarters.

The report said LG Electronics was able to post an increase in operating margins despite a year-over-year decrease in units shipped. Motorola and Sony Ericsson may be in trouble, as the report said both are rapidly losing market share and shipping fewer units.

Most companies are just starting the hard work of mobilizing workforces by bringing the software they use to smartphones. InformationWeek analyzed this issue in an independent report, and it can be downloaded here (registration required).