Mobile phone market growth slows
The global mobile phone market should grow at much slower-than-expected rates next year as consumers put off buying new devices due to deepening economic concerns, according to forecasts from analysts and manufacturers.
While industry executives often say mobile phones are the last thing consumers will give up to save money, analysts are now citing lengthening phone replacement cycles and weakening economies around the world for their weaker sales estimates.
UBS analyst Maynard Um halved his forecast for 2009 global handset growth to 3 per cent from 6 per cent, pointing to particular weakness in Europe and North America.
"We continue to believe in a tight relationship between world real GDP and device volume growth," Um wrote in a research note.
He cited UBS cutting its forecast for 2009 global gross domestic product growth to 2.2 per cent from 2.8 per cent for his own reduced handset estimate.
JPMorgan analyst Ehud Gelblum was more optimistic, but still cut his expectations for 2009 handset growth to 6.1 per cent from 8.1 per cent, citing consumer reluctance to upgrade phones, particularly in Europe, and "more modest" growth in China, one of the fastest-expanding mobile markets.
Handset market leader Nokia warned early last month that the mobile phone market would be hurt by weakening consumer confidence in many markets in 2008 and the company itself would lose market share in the third quarter.
Um said fourth-quarter results from handset makers would likely show Nokia, which commands a roughly 40 per cent share of the global market, is not the only one suffering.
"As we enter Q4, we believe it will become clearer that many handset vendors are struggling rather than problems being specific to Nokia," he and other UBS analysts wrote.
They pointed to Samsung Electronics, which trails only Nokia, and Motorola, the number three mobile phone maker, which has been struggling to regain its footing since the start of 2007.
"While Motorola and Samsung may gain some volume share in Q3, we believe the latter in particular will show poor ASP [average selling prices] and margin trends," the UBS report said.
Japanese consumer electronics maker Sharp Corp cut its annual operating profit outlook by one-third on Monday due to sluggish domestic sales of mobile phones, missing market expectations by a wide margin.
Mobile phone demand in Japan slowed this year as wireless operators such as NTT DoCoMo Inc cut sales incentives paid to retailers to keep handset prices low.
Weaker mobile phone sales hurt demand for its image sensor chips and small LCD panels that go into mobile phones.
Sharp makes core components for mobile phones in-house. That strategy maximises profitability of its mobile phone operations when demand is strong, but it also makes the company vulnerable to any downturn in the market. Sharp competes with Panasonic and Fujitsu in Japan's mobile phone industry.
The Osaka-based company now expects its operating profit to total 130 billion yen (£720m) in the year to March 2009, down from its previous forecast of 195 billion yen.
The latest projection compares with a consensus of a 170.1 billion yen profit in a poll of 19 analysts by Reuters Estimates.
Sharp's earnings were also hit by sliding LCD panel prices. It sells LCD panels to other flat TV makers as well as assembling them into its own TV sets.
"Demand for LCD TVs is set to grow further as we go forward. But it is without question that the current economic conditions will cool consumer sentiment temporarily," Sharp Executive vice president Toshishige Hamano told a news conference.
Sharp shared third place in the global LCD TV market with LG Electronics Inc in the first half of 2008, trailing Samsung Electronics Co Ltd and Sony Corp, according to research firm DisplaySearch.