Weak Economy to Sap Handset Market Growth: Gartner

HELSINKI (Reuters)- A weakening global economy will blunt cellphone market sales growththis year, research firm Gartner said on Wednesday.

Gartner said it expects market growth to slow to 11 percent from 16percent last year, while in U.S. dollar terms growth would slow to 9percent from 11 percent.

The world’s top cellphone maker Nokia (NOK1V.HE: Quote, Profile, Research, Stock Buzz) has forecast the market will fall this year in euro terms.

The euro reached record highs above 1.60 against the U.S. dollarearlier this year, but was trading at 1.475 dollars on Wednesday,roughly the level where it started 2008.

"We are starting to see impact of the economy," said Gartner analystCarolina Milanesi, adding increased competition and the weaker economywould also hurt average selling prices.

"In addition, mobile phone manufacturers will be put under pressureto maintain healthy margins while they intend to further break throughin the emerging markets to increase sales," she said.

Milanesi said she expects cellphone sales in Western Europe in 2008to be roughly on last year’s level, underpinned by strong growth in thesecond half on the back of attractive new models reaching the market.

Cellphone sales in this key region for phone makers like Nokia andSony Ericsson fell 16 percent year-on-year in the first quarter and 8percent in the second quarter.

"It’s a little bit (of weakness) in every country, with theexception of Germany and France, where we are seeing strong markets,"Milanesi said.


Handset vendors sold 304.7 million mobile phones globally inApril-June, with strong demand in emerging markets lifting sales 11.8percent from a year earlier, Gartner said.

Handset sales volumes in emerging markets surpassed developedmarkets in 2005 and last year 63 percent of phones were sold in thesedeveloping markets, according to Strategy Analytics.

The main gainer from surging sales in emerging markets was Nokia,whose market share rose to 39.5 percent in the second quarter from 36.7percent in the same quarter the previous year, the research firm said.

South Korea’s Samsung (005930.KS: Quote, Profile, Research, Stock Buzz) had 15.2 percent of the total market in the quarter, compared with 10 percent for struggling U.S. vendor Motorola (MOT.N: Quote, Profile, Research, Stock Buzz).

Sony Ericsson’s market share fell to 7.5 percent, dented by the fallin the western European market. LG Electronics’ (066570.KS: Quote, Profile, Research, Stock Buzz) market share rose to 8.8 percent.

Gartner said Motorola and Samsung sold more phones in the quarterthan they shipped, reducing inventories; while Nokia, Sony Ericsson andLG Electronics built up some inventory.

(Reporting by Tarmo Virki; Editing by Chris Wickham)