2009 Smartphone Sales: Dipping Sharply

Amid a gloomy economy, even the resilient mobile-smartphone sector is taking a hit.

The economic meltdown is cooling even the white-hot cell phone market. Last week, two major research firms released sales forecasts for 2009 that calls for pain.

IDC just lowered its numbers for cell phone sales this year, and expects total mobile phone revenues to drop 8.3 percent in 2009, the first yearly dip since 2001. Additionally, smartphone sales will only grow by 3.4 percent, according to IDC, which had formerly slated the category for an 8.7 percent increase.

"Expectations for 2009 were negative going into the fourth quarter of 2008. However, worse-than-expected results and a steady flow of negative economic news are indicating that 2009 will be gloomier than predicted," said Ryan Reith, senior research analyst with IDC's Worldwide Mobile Phone Tracker. "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."

As consumer spending has dropped, handset manufacturers and telecommunications companies have reduced their inventories, and left chip vendors with increased overstock, which had a dramatic impact on shipments, according to IDC.

Meanwhile, the U.S., Japanese and Western European markets are also not faring well, as shipments are expected to decline in these countries by 24.6 percent to 12.4 percent throughout the year, according to the research firm.

"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. 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," states the report.

Assessing smartphone growth

On the smartphone front, which IDC defines as mobile devices that run on operating systems such as Android, BlackBerry, Windows Mobile and Mac OS X, the company says the fact that the segment is still growing, albeit at a slower rate than expected, is a good sign for the future.

"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," according to the report. "The notion that this segment will remain in positive growth while the industry expects an 8.3 percent downturn speaks volumes about the potential upside for these devices when the market turns."

Meanwhile, research firm Gartner reports that in the fourth quarter of 2008, worldwide sales of smartphones reached 38.1 million units, an increase of 3.7 percent compared to the fourth quarter of 2007, the slowest rate yet.

As a proportion of all mobile device sales, smartphones remained stable at 12 percent in the fourth quarter of 2008, from 11 per cent in the fourth quarter of 2007, according to Gartner's "Market Share: Smartphones, Worldwide, 4Q08 And 2008."

The research company went on to report that Samsung entered the top five vendor ranking for the first time, replacing Sharp.

Though Nokia still has the majority of market share, almost 43 percent for last year, and is still in the top spot in terms of worldwide sales, its smartphone sales decreased by 16.8 percent year-on-year, according to Gartner.

RIM was able to capture second place with 16.6 percent of the market in 2008, likely due to releases of its BlackBerry Bold and touch-screen Storm.

Apple is still in third after RIM with a bit over 8 percent market share for last year, but the company's products aren't flying off the shelves the way they used to. Apple built an inventory of about two million iPhone units in the third quarter of 2008 which didn't sell as well in the fourth quarter, the report says.

"With Apple's sequential decline, volumes were driven by new product introductions such as the RIM Storm, the T-Mobile G1 (the first product based on Google's Android platform), and strong performance from Samsung's touchscreen products," according to Gartner.

In terms of the future, Gartner says the smartphone industry will have to brace for stiff competition.

"While sales will grow at a slower pace, the market will be driven by support from operators aggressively pushing data plans," the report says. "Smartphones will also see increased competition from full-featured enhanced phones that may offer a full qwerty keyboard. These devices offer much of the functionality of a smartphone, but at a lower price."

This article was first published on InternetNews.com.

Tags: iPhone, smartphone, RIM, OS X, mobile phones

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