- After breaking a record high in the fourth quarter of 2003, the global handset market did not experience the inventory pile-ups previously expected in the first quarter of 2004. Instead, replacement demand in the North American and West European regions remained strong, while demand for new handsets in Brazil, Russia, India, and China continued to build momentum. First-quarter global shipment volume is estimated to have reached between 128 million and 135 million units, registering approximately 20% year-on-year growth.
Leading handset vendor Nokia came under siege on two fronts. On one hand, Japanese and Korean vendors, armed with multimedia and consumer electronics know-how, gradually made inroads into West Europe and eroded Nokia's share in the mid-range and high-end market. On the other hand, Motorola, Siemens, Sony Ericsson proactively cultivated the emerging markets in India, Russia, and Central/South America. Therefore, Nokia's share in the value-line segment dropped to under 35% in the first quarter of 2004.
Responding to demand for new handsets in emerging markets, Motorola and Sony Ericsson increased orders of value-line GSM (Global System for Mobile Communications) handsets to Taiwanese makers. In the first quarter of 2004, Taiwanese shipment volume reached 12.7 million units, declining approximately 10% sequentially, but growing 21% year-on-year. Shipment value soared to US$1 billion for the first time in the first quarter, posting a 38% year-on-year rise. Handset ASP (Average Selling Price) also increased to around US$80.
Product mix and business types played key roles in Taiwanese handset shipment value and ASP in the first quarter of 2004. In Western Europe, where color display handset and embedded camera phone markets have became a major battle ground for brand-name vendors, the progressively shrinking life cycle of such mid-range and high-end handsets has encouraged brand-name vendors to produce in-house. Outsourcing of color display handsets and camera phones to Taiwanese players was therefore squeezed. Rather, Taiwanese makers mainly supplied value-line models to fill in gaps in brand-name vendors' product portfolios. With Taiwanese makers unable to catch up with model transitions, GSM dual/tri-band handset shipment share grew once again to over 60%, while GPRS (General Packet Radio Service) handset shipment share fell to under 30%, thus affecting handset ASP.
With Nokia and Samsung hesitant to release orders, the outsourcing market was limited for Taiwanese makers, who then looked to China and Southeast Asian countries for branded business. In the first quarter of 2004, Taiwanese branded shipment share grew to 19% while ODM (Own Design Manufacturing) share slid to 76%, helping to boost Taiwanese handset ASP.
In the second quarter of 2004, Taiwanese makers will further shorten model transitions for Motorola, Panasonic, and Siemens's handsets. Coupled with rollouts of new branded mobile phones, Taiwanese shipment volume is expected to reach approximately 13 million units, growing roughly 60% compared to the same period in 2003 when SARS (Severe Acute Respirator Syndrome) delivered a blow to the industry.