Mar 5, 2009 12:19 PM,

Mobile handset OEMs look to smartphones after worst Q4 ever

By Sarah Reedy

Handset manufacturers had the worst quarter-on-quarter growth ever recorded in Q4, but analysts predict smartphones could drive their recovery

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Fifth-place handset maker Motorola went from bad to worse in the quarter as sales dropped to 107 million units for a market share of 7%, a 5.6% drop YoY. The struggling handset maker has failed to introduce compelling devices, 3G products or touch-screen devices and lacks support for many popular features like GPS, Milanesi said.

While each market had its own unique trends, struggles were universal. In Asia-Pacific, quarterly handsets sales fell for the first time in the quarter due primarily to lower replacement sales. Europe, the Middle East and Africa declined as operators lowered their subsidies and users held on to their existing devices or purchased less-expensive handsets when a new phone was needed. Likewise, Japan saw a decline due to a rise in retail prices. Latin America and Western Europe were the only markets that actually saw growth in the quarter, although smaller than typical fourth quarters.

In North America, smartphones were the story of the quarter. The handset market ended 2008 with 49.1 million sales to users, of which 20% were smartphones, according to Gartner. Like the rest of the handset market, restoring consumer confidence will be the key to smartphones’ relative success going forward. The NDP puts smartphone sales to US consumers at 23% of all handset sales in the fourth quarter compared to just 12% a year earlier. For 2009, iSuppli is forecasting global smartphone unit growth as high as 11%, totaling 192.3 million units shipped up from 174.6 million in 2008.

However, the company also warned that this will only be achieved if operators cut fees for data services and offer aggressive subsidies to further reduce customer smartphone prices, said report author and senior analyst Tina Teng.

“Furthermore, wireless operators and handset brands have to sell consumers on the value of smartphones to encourage customers to upgrade,” she said in a research note. If they don’t and consumer confidence continues to erode, growth of only 6% is a more likely scenario.