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Cell Phone Vendors Ring Up Record Year

Gartner says worldwide shipments rose to 520 million units last year as buyers replaced older handsets with newer models and sales grew in emerging markets.
A record number of cell phones were sold last year by manufacturers, primarily due to people replacing their handsets with newer models and increased sales in emerging markets, market-research firm Gartner said.

Worldwide shipments totaled 520 million units in 2003, a 20.5% increase over 2002 sales, Gartner said. Sales were so good that manufacturers struggled to meet demand.

"This unprecedented demand is set to continue in 2004 with the first quarter already looking strong," Gartner analyst Ben Wood said in a statement. "We've increased our market estimate for 2004 to 580 million units."

Nokia continued to hold the lead in shipments worldwide and took the No. 1 spot from Motorola in North America, the research firm said. Nevertheless, Nokia's global market share dropped to 34.7% in 2003 from 35.1% the prior year.

"Sustained competition and aggressive pricing from existing players, loss of share in Western Europe and an increasing number of small players, particularly in Asia/Pacific, presented challenges to Nokia," Wood said.

No. 2 Motorola also lost market share worldwide, declining to 14.5% from 16.9%. The company paid a heavy price for failing to deliver some products on time throughout 2003, giving up market share to Nokia and LG Electronics, Gartner said.

However, Wood said, "Motorola has started off this year well, and its outlook for 2004 is increasingly positive."

Samsung held on to the No. 3 spot in unit shipments by focusing on higher-tier products rather than selling lower-tier, low-margin handsets that were in a more-intensely competitive market. As a result, Samsung had high average selling prices and double-digit margins.

No. 4 Siemens, on the other hand, recorded very strong growth in the second half of 2003 with low-cost, low-margin products that were ideally suited for emerging Eastern European markets, especially Russia, Gartner analyst Carolina Milanesi said. In addition, Siemens was able to pick up the slack when competitors were unable to meet market demand.

Sony-Ericsson was fifth in market share with 5.1%, followed by LG Electronics. The latter's strength in the Indian market contributed to it increasing market share to 5% from 3.2% in 2002.

In general, the Asia-Pacific market remained strong in the fourth quarter, reflecting a full recovery from the impact of the SARS epidemic earlier in the year, Gartner analyst Ann Liang said. Vendor competition remained fierce in China as local vendors fought for market share.