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Customers snubbing high-end smartphones

Worldwide phone sales hit 305m in Q2

Worldwide sales of phones reached nearly 305 million in the second quarter, up 11.8 percent over the same period last year, according to research released by Gartner on Wednesday.

While that reflects that there are some bright spots, growth was tempered by economic slowdowns in some regions. In mature markets like Europe and the US, buyers are favouring mid-tier phones over high-end devices, the researchers found. Also, fewer people are choosing to replace their phones as high fuel and food costs compete for dollars.

But some mobile-phone makers are pulling ahead despite the uncertain times. During the second quarter of 2008, Nokia boosted its market share to 39.5 percent worldwide, compared to 36.7 percent in the same quarter last year, according to the report. Samsung maintained its number two position, with 15.2 percent of the market compared to 13.3 percent in the second quarter 2007.

Their success comes at the expense of struggling Motorola, which just barely hangs on to its third-place position. Motorola dropped from 14.5 percent market share in the second quarter last year to 10 percent in the same quarter this year.

People aren't buying Motorola phones because they lack key features like 3G, GPS and quality internet browsing, Gartner said.

Phone makers have had varying degrees of success depending on the region of the world. In Japan, sales dropped 22.1 percent in the quarter compared to last year, Gartner found. The researchers blamed a lack of new phone features for the drop in sales.

While overall handset sales in Asia/Pacific were up 20.5 percent compared to last year, they were down over the first quarter. In the first quarter, operators in Asia/Pacific added 83 million connections, but they added only 75 million in the second quarter, leading to the drop in phone sales, Gartner said. High food prices and inflation contributed to the slowdown in sales, the researchers said.

In Western Europe, sales of smartphones were down 8.2 percent compared to last year, but up 16 percent compared to the first quarter 2008. The region, which has a 121.5 percent mobile-phone penetration rate, relies heavily on growth through replacement handset sales, so challenging economic conditions affect overall sales there, Gartner said.

Despite poor economic conditions in the US, phone sales in North America grew 6.58 percent compared to the second quarter 2007, driven mainly by replacement sales, Gartner said.

For the full year, Gartner expects 11 percent overall growth in phone sales and sales of 1.28 billion units.

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