The Big Three handset manufacturers-Nokia Corp., L.M. Ericsson and Motorola Inc.-continue their reign over the global wireless handset arena, together controlling more than two-thirds of the market.
Nokia has emerged as the clear leader of the three. Analyst firm Herschel Shosteck Associates Ltd. estimates Nokia will have a 30.8-percent market share worldwide by the end of this year, followed by Motorola with 25 percent and Ericsson with 12.7 percent.
Bryan Prohm, senior industry analyst at Dataquest, said Nokia should continue to lead the market through the end of this year. But Motorola is poised to make a solid comeback in terms of market share after a slow start in the digital arena, he said.
Meanwhile, Ericsson is “bottoming out in terms of market share,” he said. Among other factors, Ericsson’s absence from the Code Division Multiple Access technology market has limited its success in markets like the United States, where CDMA is an increasingly large component of sales.
“The Big Three are so far ahead of everybody else,” said Prohm, “they’ve established a monopoly of three over the market, and there’s no reason to expect that to be broken any time soon.”
However, CDMA presents a wild card that could shake up the existing regime.
“The growth of the U.S. CDMA market continues to play havoc with the market-share fortunes of the industry’s traditional Big Three handset manufacturers,” said Prohm. “For example, Nokia’s continued weak share position in CDMA has prevented it from completely running away with the U.S. market.
“Meanwhile, Motorola’s successful CDMA portfolio helped it surpass Ericsson during the second quarter to capture third place in U.S. digital handset share,” continued Prohm. “Ericsson, which currently does not offer a CDMA product, fell to fourth in digital share.”
The big picture
With CDMA technology gaining in importance, the sale of Qualcomm Inc.’s handset business will be key.
The company’s singular focus on CDMA technology has propelled it into second place in the U.S. digital handset market with a 16-percent market share, topped only by Nokia, which controls one-third of the U.S. digital handset market, according to Dataquest.
“The bottom line is Qualcomm controls about 33 percent of the CDMA market in the United States through the second quarter of this year, according to our estimates,” said Prohm, noting
CDMA sales are approaching half of all digital handset sales in the United States.
“Qualcomm is a heck of an asset for somebody to pick up,” said Prohm. “It gives them instant credibility in the U.S. marketplace from a market-share perspective.
“As CDMA becomes a larger and larger component of the global phone market, if the Big Three are not successful in CDMA, then that could become their Achilles heel as far as being able to hold on to those market-share positions going forward,” said Prohm.
The little picture
Meanwhile, some of the smaller manufacturers are knocking on the door.
Jane Zweig, executive vice president of Herschel Shosteck Associates, said Samsung and Matsushita are two manufacturers positioned to challenge the Big Three.
CDMA technology presents an opportunity for a smaller player to gain significant market share, particularly in the United States, said Dataquest’s Prohm.
“They have to figure out what their strategic plan is,” said Prohm. “If it’s to displace one of the top three from this category, that might not be the most realistic thing to try to do.
“But because, in particular with CDMA, the Big Three are so under-represented as far as the overall market goes, as CDMA grows and becomes a more competitive technology and a more compelling technology for operators to commercialize … that’s a space where some of these smaller guys can compete and win in the short term, and use that as a springboard to gain a global presence in the future,” said Prohm.
“There’s a chance the Big Three won’t hold the same kind of share position in CDMA relative to other technologies they compete in,” he said.
Some of the smaller players that aren’t able to compete as intensely, said Prohm, may have to make a decision to compete in selective markets or exit the market altogether.
On the horizon
While CDMA and other digital handsets proliferate, traditional analog handset sales are beginning to wane.
Dataquest estimates more than 16 million CDMA handsets will be sold this year in the United States, followed by 13.3 million Time Division Multiple Access handsets and 8.9 million analog handsets. Global System for Mobile communications handset sales are expected to reach 5 million.
“The dedicated analog handset is a market that we definitely see the end of its product life cycle on the horizon,” said Prohm. “But there is still a lot of benefit to keeping the product going.”
“There are 47 million analog subscribers still out there, and not everyone is going to go to digital.”
Zweig, of Herschel Shosteck Associates, said analog handsets are still important for roaming, and they also are widely used in low-end plans as well as prepaid offers.
