May 19, 2011

Overstock of Mobile Phones Cap Growth

Recent analysis from Gartner (News - Alert) says that the growth of unsold phones will cap future quarter sales.

In the wake of the tsunami and earthquake in Japan, retailers stocked up on the gadgets, causing an overstock of inventory, totaling 13.3 million handsets unsold in the first quarter. It is because of this Gartner has lowered its 2011 cellphone market forecasts, down by 10-15 million devices.

Gartner is hopeful for a summer comeback, however.

“During Q3 we think everything will go in place, and we will have a much stronger Q4 than we had for many years,” said Roberta Cozza, principal research analyst at Gartner.

This analysis follows Gartner’s research on mobile communication devices for Q1 worldwide in which they found a 19 percent increase of sales from that of Q1 in 2010.

Smartphones continued to outpace the rest of the market, and a newly competitive mid-tier smartphone market will drive smartphones into mass adoption and accelerate this trend.

“Smartphones accounted for 23.6 percent of overall sales in the first quarter of 2011, an increase of 85 percent year-on-year,” Cozza said. “This share could have been even higher, but manufacturers announced a number of high-profile devices during the first quarter of 2011 that would not ship until the second quarter of 2011. We believe some consumers delayed their purchases to wait for these models.”

There is currently about six to seven weeks worth of inventory of finished products in the channel and about four weeks worth of inventory for components after Japan’s tsunami and earthquake.

Nokia (News - Alert) sold 107.6 million mobile devices in the first quarter of 2011. Its market share declined 5.5 percentage points year-on-year, and its share has reached its lowest since 1997.

According to Gartner, Nokia will face challenges from Android (News - Alert) competitors and from some Japan-induced supply constraints.

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Michelle Amodio is a TMCnet contributor. She has helped promote companies and groups in all industries, from technology to banking to professional roller derby. She holds a bachelor's degree in Writing from Endicott College and currently works in marketing, journalism, and public relations as a freelancer.

Edited by Jennifer Russell