World mobile equipment market
Date: Mon, 03/15/2010 - 21:28 Source: IDATE press department
As expected, 2009 was a tough year for the telecom equipment market. With the first warning signs of a slowdown in summer 2008, equipment manufacturers were the hardest hit by the recession. The difficulties encountered by the telecom equipment market were due especially to telcos’ reduced spending that was slashed even further as the economy tanked. Dipping more than expected, especially after years of growth, the market is expected to shrink by 2% in 2009.
The mobile phone market has been deeply affected by the global economic crisis that began in 2008. With strong pressure on sales, the mobile handset market has gone from double-digit growth in 2002 to negative growth (-4%) in 2009. In terms of volume, the number of handsets sold dropped by 6% in 2009, down to 1.12 billion units, on the heels of +6% growth in 2008, which was nevertheless below initial predictions. The overall downturn that is currently affecting the cellular market is expected to continue and constrict growth in 2010 (+2.5% YoY).
Operators have been selective in their spending on network infrastructure, confining their investments to IP-based and optical transmission equipment, to be able to satisfy their residential and business customers’ ever-increasing bandwidth requirements. Mobile equipment sales have come under strong pressure, although vendors do see certain regions, especially the Middle East, Africa and Latin America, as future growth areas once 3G auctions have wrapped up. Mobile equipment in fact continues to dominate telecom industry spending around the globe.
The wireline infrastructure market was down again in 2009, and carriers’ transition to NGA networks – and particularly to FTTx infrastructure – was not enough in the grim economic climate to offset the decline of DSL equipment sales (-15% decrease in DSL port shipments in 2009).
On the flipside, the current economy has stepped up demand for services, such as managed solutions, that provide increased efficiency. Carriers’ cost-cutting measures have translated into weakened control over their networks which, in 2009, meant a real upswing in infrastructure outsourcing deals and a growing number of operators turning to infrastructure sharing.
Changes in the equipment market landscape
The gap between vendors' performance widened in 2009, a year that served chiefly to expose their struggles. Nortel was the first victim, and its bankruptcy reshuffled the landscape as the company auctioned off its business, piece by piece. Virtually all infrastructure suppliers have been affected by the downturn, and the market is now populated by five heavyweights, including Ericsson which has managed to strengthen its position by taking over some of Nortel’s assets and expanding its foothold in the North American market.
Meanwhile, some of the smaller manufacturers, such as Motorola, have really felt the squeeze – their lack of critical mass making it hard to withstand intensified price wars. Mega mergers have also resulted in underperforming revenue growth, with both Alcatel-Lucent and Nokia-Siemens posting negative revenue growth for two years running.
Chinese manufacturers continued to enjoy a healthy growth momentum, albeit at a lesser pace than in the five past years. Huawei, which had being boasting a 40% growth rate, is expected to report a 20% increase in income in 2009, which still puts it near the top of the ranks, alongside ZTE.
Nokia remained the top handset manufacturer, with a 36% market share in 2009. However, with sales in emerging markets slowing because of the downturn, pressure from the competition is increasing. The two major Korean, manufacturers Samsung and LG, consolidated their positions and moved into second and third spot in the global rankings – having increased their market share over 2008 through their commitment to high-end and innovative devices. Meanwhile, Motorola continued its struggled to overcome certain difficulties, while Chinese equipment manufacturer ZTE increased its market share, rising through the ranks to become the globe’s 6th largest handset maker.