According to IDC’s Western European Quarterly Mobile Phone Market Tracker, the Western European mobile phone market (consisting of traditional mobile phones and converged devices) witnessed healthy year-on-year growth of 20% in 2Q05. Shipments reached 37.6 million units, predominantly driven by increased traction in low-end segments and renewal demand for new feature-rich handsets, with sequential growth of 4% raising expectations for total 2005 market growth. In light of healthy 2Q market growth, IDC’s short-range forecast predicts the Western European total mobile phone market will grow 11% year on year in 2005.
Despite the year revealing a progressively bleak outlook for the European economy underpinned by slowdowns in consumer spending, 12-month replacement cycles and the evolving perception among Western Europeans of the mobile phone as a fashion accessory are maintaining healthy year-on-year market growth.
“The sustained advancement in technological specifications is further shortening product life cycles and providing consumers with the necessary incentive to upgrade handsets, while providing vendors with new opportunities to position devices as converged multimedia solutions, and cooperatively brand handsets to leverage brand strength from parallel markets such as imaging and music,” said Geoff Blaber, research analyst, European Mobile Devices.
Year-on-year growth of 140% for converged devices drove record shipments of 2.7 million units in 2Q05, increasing their proportion of the total mobile phone market to 7% from just 4% in 2Q04. Voice-centric Series 60 devices continued to drive market growth due to Nokia’s success in positioning its WCDMA 6630 and 6680 as advanced multimedia solutions, serving to push smart phones further into the mass market and wider consumer consciousness. However, technological features and form factor rather than software remain the primary decision criteria for most users, with the Nokia 6230i, Sony Ericsson K750i, Motorola RAZR, and Samsung E720 all witnessing strong demand in 2Q contract renewals.
Providing further impetus to the mobile phone market in 2Q was year-on-year growth of 164% for WCDMA handsets as consumers upgraded in growing volumes from 2.5G devices, in response to a growing range of compelling devices and the development of operator content variety and quality. The widespread availability of the Nokia 6630 and 2Q launches of Sony Ericsson’s Z800 and K600 provided further traction as 3G handset shipment volumes grew to account for 12% of the total mobile phone market.
IDC points to the wealth of new handsets expected in the final quarters of 2005 as a major factor driving the 11% growth forecast by IDC. In particular those orientated towards multimedia and positioned as converged music solutions such as Sony Ericsson’s Walkman range, Motorola’s collaboration with Apple, and Nokia’s N91 are devices likely to capture consumer demand, particularly in the high-volume final quarter. Furthermore, with additional Series 60 smart phones such as the N series anticipated in 2005 and the first Windows Mobile 5.0 devices such as the WCDMA HTC “Universal,” the converged device market is predicted to grow 87% year on year. IDC further predicts that the impetus provided by increased consumer spending during the Christmas build-up will increase WCDMA’s proportion of the mobile phone market to 14%.
“As the mobile phone market becomes increasingly segmented in Western Europe, vendors are under pressure to expand their portfolios in order to comprehensively fulfill market demands with regard to air interface, form factor, technical specifications, multimedia capability, software, and ASP. Although a steady flow of new handsets will contribute to market volume growth in 2005, the challenge for vendors is to meet differing segment requirements without over-extending the portfolio and adversely affecting margins,” said Andrew Brown, program manager for European Mobile Devices at IDC.