Last week’s handset shipment figures from Strategy Analytics show just how much the mobile device market has changed in the last few years. The idea that Apple and RIM sell more devices than Sony Ericsson and Motorola would have been unthinkable a few short years ago, while the fact that it is ZTE that has the momentum among the also-rans demonstrates a significant change in the power base.

Obviously, the further back one looks, the more obvious the change: a BBC report on mobile phone market shares for Q3 2000 saw Nokia in its familiar number one position, followed by Motorola and Ericsson, with the top five rounded-out by Siemens and Alcatel, and with Panasonic knocking on the door – at this point, Siemens was deemed a big winner, having overtaken Alcatel and Panasonic to secure its position in the chart. Samsung and LG were nowhere to be seen, RIM was a niche player at best, and Apple had not even launched its first iPod, let alone become a tier-one handset manufacturer. The way fortunes have changed in the interim is well-documented, and it is certainly possible that in ten years time the picture will again be totally different.

Back in the present day, much has already been written about the woes of Nokia, which has seen its market share eroded significantly in the last few years. While the company is still dominant – it has a 12 point advantage over number-two placed Samsung – it could easily be argued that we are moving toward a more healthy situation, where one player does not have complete dominance and market share is more evenly split among a portfolio of competitors. This has got to be good for consumer choice, in the same way that increased competition for Apple in the smartphone space is a good thing – if you want a Nokia device or an iPhone, then buy one, otherwise there should be a raft of alternatives to choose from. And it’s not as if Nokia is shrinking: its shipment volumes increased in Q3, and the company has suffered somewhat from component shortages which have limited supply in its mass-market business. But its competitors are becoming more effective.

LG’s woes are also noteworthy, if only because it was the only top-five vendor to see its shipment volumes shrink. The company still has significant headway over number-four placed Apple, with market shares of 8.7 percent and 4.3 percent respectively, but then it is not that long ago that Motorola held this number three position, and now it is not even in the top five – once the slide starts, it is difficult to stop. In some ways, LG is suffering from the same problem that has already impacted Motorola and Sony Ericsson – a lack of appealing smartphones – although its strength in emerging markets and mass-market touchscreen devices has sheltered it slightly in previous months. At least it is aware of this, with new Android and Windows Phone 7 devices launched to address the malaise, although it may find it struggles to differentiate its products from rivals on anything other than price.

The big challenge for RIM and Apple will be in maintaining growth, while Sony Ericsson, Motorola and ZTE snap at their heels. While much of the focus of the anticipated CDMA iPhone has been its availability through Verizon Wireless, this device would also be able to deliver volumes for Apple from China Telecom and operators in India and Latin America, enabling the company to maintain its growth trajectory – although these are also price-sensitive markets, where the potential customer base for the iPhone may be constrained. In contrast, RIM’s climb has been somewhat less stellar, but the company already has wide geographic distribution and products targeting a number of different user groups, which means there may be less in the way of low-hanging fruit to drive future increases.

While the new players undoubtedly have significant momentum in the smartphone market, this is a sector that Sony Ericsson and Motorola are now addressing quite effectively, with smartphones making up a significant proportion of the shipment numbers for these companies. Where the more established companies stand to gain further, however, is through their experience of delivering a full portfolio of devices at multiple price-points, including lower-cost devices for emerging markets – which will be useful for driving volumes. With this kind of balanced portfolio, it should be easier to increase sales globally, limiting the risks associated with being too reliant on one product or market. ZTE has also been especially active in diversifying its range in recent years, launching smartphones (albeit low-cost devices, rather than iPhone rivals) and targeting devices including the US and Europe from its APAC stronghold.

Of course, there is more to success in the mobile industry than volumes alone. While LG is shifting more handsets than Apple, it is losing cash while doing so, which is not a great long-term strategy for running a business. Likewise, while Apple has managed an appearance in the top-five this time round, shareholders are perhaps less likely to worry about any subsequent slip when they are safe in the knowledge that the company is punching above its weight in terms of profit generation, by focusing solely on a highly profitable niche. Perhaps the key to succeeding in the volume game is controlling margins effectively – an area where Nokia has an acknowledged strength.

 

Steve Costello

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members