Cellphone sales up after shocking year

Nokia makes big comeback as worldwide phone sales top 670 million units

Worldwide mobile phone sales jumped 30% in 2004, boosted by replacement buys and strong growth in emerging markets, according to Gartner.

Sales surpassed 674 million units last year compared to around 520 million in 2003, the research company says. A solid fourth quarter helped boost last year's performance beyond Gartner's previous forecasts. Sales in the final quarter reached 195 million units, a 24% increase from 157 million units in the same period a year earlier.

"Growth came from everywhere and was much faster than we predicted at the beginning of the year," says Gartner analyst Carolina Milanesi.

The momentum should continue through 2005, leading to sales of more than 730 million units this year, Gartner predicted.

Nokia had a difficult start to the year but recovered somewhat during the second half. The Finnish mobile phone giant took 30.7% of the market in 2004, down from 34.8% in 2003. Fierce competition from Motorola and Samsung took the ring out of its bell, pulling its sales down in the first half, Gartner says. But its broadening portfolio of products and still popular low-end phones helped it regain footing for 2005, the researcher says.

Nokia ended up in better shape than it was at the start of the year, helped by price cuts in the second quarter and new product releases, Milanesi says. However, the company isn't out of the woods yet, and 2005 could be even tougher as Nokia goes up against new, stylish models from competitors, including phones that play music.

Meanwhile, Motorola regained its second-place position from Samsung in 2004, grabbing 15.4% of the market, thanks to a revitalised brand and competitive pricing in emerging markets. Motorola not only attracted attention with its super-thin RAZR V3 phone, it also spiced up its image by announcing a new music-focused and clamshell phones.

Samsung took 12.6% of the market, compared to 10.5% in 2003, as it siphoned off some sales from Siemens. Siemens landed 7.2% of the market, down from 8.4% a year earlier, Gartner says.

Samsung's efforts to raise brand awareness in China and concentrate on multi-megapixel camera phones paid off, although going forward the company will have to broaden its portfolio into the low end to compete against Nokia and Motorola, the analyst group says.

LG Electronics ended the year with 6.3% of the market, compared to 5.0% last year, while Sony Ericsson Mobile Communications notched its share up to 6.2% from 5.1% a year earlier.

Sales grew in mature markets like North America, Hong Kong, Singapore and Australia thanks to mobile phone replacements. Western Europeans were lured by fourth-quarter holiday sales and snazzy new camera phones with color screens, and camera phones were also snapped up in China.

Latin America continued to grow its base of new subscribers, particularly in Brazil.

While some emerging markets, like Russia, will see a comparative slowdown in 2005, that may change if mobile operators edge prices down, Milanesi says. A sub-US$40 phone could be key in netting further sales in those regions, she says.

Phone vendors will continue to ring in strong sales in 2005, Gartner predicted, but to match the benefits from last year's replacement buys they will have to compete for new customers in emerging markets. In Western Europe, upgrades to 3G (third-generation) phones may also aid growth, according to Milanesi.

If the phone makers play their cards right, offering a sub-US$40 phone for emerging markets and hot 3G offerings in more mature regions, sales in 2005 could even top 770 million units, Milanesi predicted.