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. Last Updated: 07/27/2016

Emerging Markets Fuel Boom in Handsets

Global sales of cellphones could grow even faster than forecast in 2004 after a stronger than expected 2003 when market leader Nokia lost ground for the first time in many years, a survey found Wednesday. Sales of handsets, the world's biggest consumer electronics market worth almost $100 billion per year, amounted to 520 million units in 2003, almost 10 million more than initial estimates last month, market research group Gartner found.

It now expects some 580 million phones to be sold in 2004, 20 million more than predicted last month, amid stellar demand for phones with color screens in developed markets and cheap handsets in emerging markets like China, India and Russia.

Last year's sales are between 20 million and 50 million units higher than estimates by various handset makers themselves.

"We've seen much stronger than expected replacement sales, and there was a surge in demand in emerging markets which was much better than expected," Gartner analyst Ben Wood said.

By underestimating market demand, some handset vendors such as Japanese-Swedish joint venture Sony Ericsson and U.S.-based Motorola were not able to meet demand for their products, he added. The respective No. 5 and 2 both lost some market share in 2003. But the highest-profile loser was Nokia, the Finnish behemoth which sells more than twice as many phones as its nearest rival. Its market share dropped to 34.7 percent from 35.1 percent in 2002, the first annual decline in many years.

"Nokia is facing competitive pressures on all fronts," Wood said.

In emerging markets, Nokia was feeling the heat from Germany's Siemens, the world's No. 4 handset maker, which attacked Nokia's core market of budget phones where the Finnish giant generates the volumes that give it scale economies.

Some basic handsets were now available at prices below $40 in emerging markets, down from between $50 to $70 last year.

"Siemens has the most aggressive prices in the market. They've seemed to accept lower margins on lower-priced products," Wood said. On the other end of the spectrum, of more expensive phones with color screens and built-in cameras, Nokia was getting a run for its money from third-placed South Korea's Samsung, Motorola and Sony Ericsson, but also smaller players like France's Sagem and Japan's Sharp.

"It's all incremental, and eating away market share from Nokia," Wood said, adding Nokia had lost ground in Western Europe but had become the top seller in North America where it used to be much weaker and where it has fixed its model lineup.

Gartner measures handset sales to consumers, giving a better understanding of real consumer demand than other research groups, which measure bulk sales to distributors.

Motorola's 2003 market share slipped to 14.5 percent from 16.9 percent a year earlier. Samsung climbed to 10.5 percent from 9.7 percent, Siemens grew to 8.4 percent from 8 percent, with particular strength in the second half-year.

Sony Ericsson slipped to 5.1 percent from 5.4 percent, but had recently created hit models with products such as the T610 camera phone. Top five challenger LG Electronics from South Korea ended at 5 percent, up from 3.2 percent.