Growth in the region was driven by the success of the top 3 vendors, with Nokia growing impressively to take around 51% market share in EMEA and both Sony Ericsson and Samsung gaining at the expense of Motorola, which continued to struggle due to a lack of new model activity.
Overall ASPs continued to decline during the quarter as vendors looked to expand more aggressively into midrange and low-end segments of the market. Increased focus on midrange and low-end handset terminals continued to have an eroding effect on overall ASPs, but Nokia's major gains in market share and healthy operating margins proved that a balanced portfolio with a key focus on margin-rich handsets will result in both improved margins and market share gains. The challenges faced by Motorola highlight the importance not only of a balanced portfolio, but also a core brand identity that resonates with users and avoids unnecessary churn – an increasingly painful issue for mobile operators.
„The very strong results recorded in Western Europe this quarter can in part be attributed to Apple. All the media coverage surrounding the iPhone since it was announced last January has put the mobile devices industry in the spotlight, forcing vendors to launch new design-oriented and musicdedicated products. The iPhone also shed light on lesser-known functionalities already integrated in mobile devices, like mapping and browsing, and raised the general level of knowledge on what mobile devices can do nowadays,“ said Jean Philippe Bouchard, senior research analyst for EMEA mobile devices at IDC.
Market performance in CEMA in 2Q07 saw a fall-back in the rate of growth, with increasing market maturity and some shipment declines in Russia, Ukraine, and the more mature markets of Central and Eastern Europe, leaving expansion focused principally on the poorer markets in the Middle East and Africa. The April to June period was quiet in CEMA's largest market, Russia, with shipments at 6.65 million below those of the same quarter a year ago. The three brands that have been making steady gains in recent quarters – Nokia, Samsung, and Sony Ericsson – saw a better performance in Russia in the second quarter. Nokia led the market, but was only marginally ahead of Samsung. The biggest casualty was again Motorola, which has seen infrequently replenished models impact sales. Across the Middle East and Africa, Samsung and Sony Ericsson competed strongly in the midtier and to a lesser extent the high end of the market, with the fading performance of Motorola leaving Nokia in a stronger position in key entry segments.
Vendor Highlights, 2Q07
Nokia dominated leadership of the mobile phone market in EMEA, rising to its highest level ever, with a market share of 51%. Importantly, Nokia also achieved its highest operating margins on the device business in three years, due to the success of three core products: the all-round N95, business-oriented E65, and mass market 6300 handset. The vendor also supported its core portfolio with strategically important handsets such as the 6280, 6233, and entry level 1600. IDC expects Nokia to carry on building out its low-end and midrange portfolio, but maintain margins with core products.
Samsung gained more ground and although the vendor had already overtaken Motorola in handset revenue terms it continued to gain even more on unit shipments, with 17% market share. The vendor increased the amount of shipments sold to Europe to 32% overall, up from 29% in the same period in 2006. A broad 3G portfolio and continued success of the Ultra Edition handsets in the mature markets in Western Europe and an increased volume of entry tier handsets in emerging markets of CEMA helped to drive growth for the vendor, although Samsung's average selling price, as in Sony Ericsson's case, has eroded with a push for market share and emphasis on entry level models. Samsung's ASP in the quarter was $148, down 5% from the previous quarter.
Sony Ericsson continued to record gains in major markets, with CEMA and Western Europe representing two of its three strongest growing regions, and held 14% market share in the EMEA region. Strong growth was due to low and midtier feature phones as average selling prices fell 14% from €145 in the same period last year to €125 this year as it released more low and midtier models such as the W300 and W200 Walkman phones and the K310 and Z310 phones. At the same time, the company continued to strengthen its product lineup by announcing a large number of new products across a variety of price points, including the K850, an HSDPA, 5MP Cyber-shot phone, and the W960, a high-end Walkman phone with 8GB of onboard storage. Motorola slipped to fourth in the market in 2Q07, down one place from 1Q with 6% market share, and continued to pay the price for market share gains with low-cost handsets and over-reliance on the RAZR line. However, Motorola replaced Ron Garriques with Stu Reed, previously EVP of the supply chain organization, and emphasized the focus on distribution on logistics, although Motorola urgently needs to replenish its ageing product lines. IDC already mentioned several quarters ago that continued brand extension was a risky strategy, and now competitors have made ground from Motorola. Growing the converged device portfolio by introducing the 3G Motorola Q and the UIQbased RIZR Z8 in order to protect margins and shift the product mix away from a higher prepaid mix will be crucial to Motorola.
LG Electronics held market share of 4% and recorded operating margin highs of 11% due to a higher-end portfolio mix, as the Prada and Shine handsets continued to prove successful on renewals in the more mature markets of Western Europe. However, with LG's planned expansion into lower-end handsets, IDC believes it is very important for the vendor to maintain a balanced portfolio.