Motorola's poor second-quarter performance in the global mobile handset market helped boost the results of its competitors, most notably Samsung Electronics, according to a preliminary ranking from iSuppli.
In the second quarter, Motorola of the United States shipped 35.5 million mobile handsets, a 21.8 percent decline from 45.4 million in the first quarter of 2007. Company market share plunged to 13.3 percent, down 4.6 points from 17.9 percent in the first quarter. Motorola was the only company among the Top-5 OEMs to suffer a decline in shipments.
Meanwhile, Samsung of South Korea shipped 37.4 million mobile handsets during the period, a 7.5 percent increase from 34.8 million during the first quarter. This gave Samsung a market share of 14.1 percent, up from 13.8 percent in the first quarter, allowing it to displace Motorola as the world's second-largest mobile-handset OEM in the second quarter.
"The mobile-handset business moves fast; the rapid pace of innovation means that products that were red hot last quarter are ice cold the next quarter," said Tina Teng, analyst, wireless communications for iSuppli. "Motorola's product mix in the second quarter remained largely unchanged compared to the first quarter, with a substantial proportion of upgraded RAZR handsets being offered. With its product line standing pat, Motorola reported its Average Selling Price (ASP) improved slightly, rising by $1.25 compared to the first quarter. This resulted in Motorola suffering an operating margin of negative 6.2 percent during the period."
Motorola had held the No. 2 rank in mobile handsets at least since the first quarter of 2001 when iSuppli began tracking this market. Meanwhile, Samsung increased its handset sales in Europe. The South Korean electronics giant also shipped a larger number of handsets to emerging regions, including Latin America and Asia.
Samsung's ASP took a tumble during the quarter, dropping by 4.5 percent compared to the first quarter. However, this was due to Samsung's strategy of selling greater quantities of low-cost handsets to emerging regions.
Motorola's Misfortune is Competitors' Gain
While Samsung was the most prominent beneficiary of Motorola's woes, all the top handset OEMs expanded their market share at the company's expense. Leading handset OEM Nokia gained 1.9 percentage points of share, Sony Ericsson added 0.7 of a point and LG Electronics boosted its position by 0.9 of a percentage point.
"To get back in the mobile handset race, Motorola must improve its product mix by offering attractive high-end, highly profitable 3G models - especially in Europe," Teng said. "The company also needs to cut operating costs. It's likely that Motorola will need at least another two quarters to regain its competitive position."
Nokia Pads its Lead
Market leader Nokia in the second quarter continued to outperform the industry, shipping 100.8 million units, up 10.6 percent from 91.1 million in the first quarter of 2007. The mobile-handset giant achieved a 37.9 percent market share in the second quarter. The company widened the gap compared to the No. 2 player to 23.8 percentage points, up from 22.2 points in the first quarter.
The mobile-handset giant also reported a slight improvement in ASP, rising to $122.8, up from $117.4 in the first quarter.
Nokia's robust second-quarter operating margin of 20.9 percent serves as a testament to the admirable efficiency of the company's supply chain. The only downside in Nokia's second quarter report was the shipments to North America declined to 4.1 million units, down from 5.2 million during the same period last year.
LG Lives Large
No. 5-ranked LG Electronics of South Korea in the second quarter posted the highest sequential growth rate among the Top-5 mobile handset makers, at 20.9 percent. Company handset shipments rose to 19.1 million units, up from 15.8 million in the first quarter.
This represented a major turnaround for LG, which had been struggling with poor operating margins and weak sales in Europe for the past few years. The second quarter marked the first time that LG posted an operating profit market of more than 10 percent since 2004.
The improvement in operating profit margin suggests that LG's product mix now has an increased proportion of higher-priced premium products. LG in the second quarter boosted its volume shipments of GSM handsets in Central America, South America and Europe and in its home South Korean market.
Sony Ericsson on a Roll
No. 4-ranked Sony Ericsson continued its advance in the global mobile handset market in the second quarter, posting a 14.2 sequential shipment increase and a whopping 58.6 percent year-over-year rise. This was the highest year-over-year growth rate among the Top-5 handset OEMs.
The company has been on a roll for more than a year now, when it took over the No. 4 rank from LG. Sony Ericsson has continued to post robust shipment gains due to its strong position in multimedia handsets and its invaluable brand name.
The company scored a 9.4 percent market share in the second quarter of 2007, keeping it 2.2 percentage points ahead of LG.
Sony Ericsson did suffer a 4 percent ASP decline in the second quarter. However, this is understandable given the company's entry into the market for inexpensive handsets for emerging regions. Despite this decline, the European/Japanese joint venture still maintains its leading ASP position at $169 per phone.
A Good Quarter
The second quarter of 2007 brought a normal, healthy seasonal sales pattern, with shipments of 266 million handsets, up 5.1 percent from 253 million in the first quarter. For the first half of 2007, shipments amounted to 519 million units.
iSuppli predicts shipments of 1.1 billion units in 2007, up 12.9 percent from 990 million in 2006.
