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Thursday, 12 March 2009 19:11

Crunch time for worldwide mobile phone shipments as economic crisis hits

Almost daily there’s more news about the devastating impact the worldwide economic downturn is having on all business sectors, including the technology industry where the latest report reveals a big drop in mobile phone shipments.

In the latest tale of woe, the worldwide mobile phone market has copped the full effects of the economic crisis with shipments in the fourth quarter of 2008 falling 11.6% year over year, the first time the quarter has not recorded double digit growth in seven years. The fourth quarter fall was despite the market in 2008 growing by 4.3% over 2007.

And the news for this year is not any better, with IDC in its latest market report predicting a very rough 2009 with shipments of mobile phones forecast to be down by 8.3 %.

IDC says that, as consumer spending has dropped, handset manufacturers and mobile operators have reduced supply on hand, which has left chip vendors with increased inventory.
“Inventory management has had a dramatic impact on shipments, but consumer demand is not falling as fast,” according to Ryan Reith, senior research analyst with IDC's worldwide mobile phone tracker.

“Large chip vendors have been working to restructure inventory levels over the past couple of months to deal with the expected downward year and should see some stabilisation once inventories are reduced.”

The IDC report found that mature regions such as Japan, the United States and Western Europe all face tough times, with predictions of shipment declines ranging from -24.6% to -12.4% throughout 2009.

“In these markets, operators are struggling to find the right mix of marketing and device subsidy to entice consumers to spend while finances are tight,” says Reith, adding that “the double-digit growth rates the BRIC countries (Brazil, Russia, India, China) have seen in the past are also expected to slow to a collective growth rate of 0.3%. India still remains the bright spot within that group, while Russia is experiencing a severe cut back in consumer spending and is predicted to drop significantly.

Reith says that expectations for 2009 were negative going into the fourth quarter of 2008, but worse-than-expected results and a steady flow of negative economic news were indicating that 2009 will be gloomier than predicted.

"Concern is understandable during this time, but note that the mobile phone market still has plenty of room to grow on a global scale and we expect recovery will begin in the first half of 2010."

Reith said that the outlook for converged mobile devices – or smartphones - had also been scaled back as a result of the industry's changing dynamics, with the previously stated 8.7% growth reduced to 3.4% as IDC expects all segments to be effected.

“In the years to come the industry will undoubtedly migrate more toward the converged device segment, yet in tough economic times the high price point these devices carry can tend to stand out in the consumers eye. The notion that this segment will remain in positive growth while the industry expects an 8.3% downturn speaks volumes about the potential upside for these devices when the market turns.”

"The explosive growth of mobile applications adds a new dimension to converged mobile device growth, one that has resonated with users worldwide," says Reith.

Ramon Llamas, senior research analyst with IDC's mobile devices technology and trends said the success of the Apple iPhone and App Store had shifted the paradigm for consumer behaviour around the smartphone category, with new mobile applications popping up every day.

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