Nokia, RIM, Apple Led Record-Setting Q2, Report Says

Nokia, RIM and Apple led a global smartphone market that hit a record high of 60 million units during the second quarter, Strategy Analytics says. While Nokia's share rose, Apple's honeymoon period in mobility may be coming to a close.

With Nokia, BlackBerry maker Research In Motion and Apple leading the way, the global smartphone market saw shipments rise to a record high of 60 million units during the second quarter of 2010. According to a July 22 report from research company Strategy Analytics, shipments were up from 41.5 million smartphones a year ago, making for annual growth of about 43 percent.

Smartphones now account for 19 percent of the worldwide handset market, up from 15 percent a year ago. Strategy Analytics attributed this to both "healthy operator subsidies" and "vigorous competition" between premium-tier vendors and makers of the growing number of lower-cost phone models running the Symbian and Android operating systems. As competition increases from telecommunications companies and the PC and consumer-electronics industries, even Nokia, RIM and Apple are reportedly finding it difficult to raise prices and profits.

Still, leader Nokia, which in recent quarters has struggled to aggressively compete at the highest tier of the smartphone market, captured 40 percent of global market share during the quarter. It shipped 24 million units during the quarter, up 21.5 million units from the quarter before-and up 42 percent from the 16.9 million units it shipped a year earlier.

The Finnish phone maker, which, given its recent stumbles, is rumored to be shopping for a new CEO, managed this success through a mix of competitive pricing, a considerable retail presence, heavy promotion of its portfolio, and strong sales in South America and the EMEA region (Europe, the Middle East and Africa), stated the report.

Nokia may remain strong through the third quarter, following its planned release of the N8 with Symbian 3, wrote report author Neil Mawston.

"It is an innovative mobile 'set-top box' phone for the home that combines multipinch Internet browsing with HD [high-definition] video playback and Dolby Digital Plus via HDMI cable," Mawston wrote. "The N8 provides a credible alternative to Apple and Android touch-screen models, but its initial lack of distribution in the United States, the world's most important market for premium smartphones, means the N8 may not achieve its full sales potential."

In the No. 2 position, RIM shipped 11.2 million smartphones worldwide, up from 8 million units a year earlier. While this constitutes a 40 percent annual growth rate, Mawston described the pace as "relatively sluggish," given that RIM's smartphone volumes previously grew more than twice as fast as the industry average, but has since slowed to meet that average.

While RIM faces "fierce competition" from Apple and Android-running handsets, Mawston wrote, it managed to keep its market share at a steady 19 percent, thanks to strong international sales, particularly in Western Europe and South America. Despite this good-enough performance, he warned that RIM needs to expand its touch-screen portfolio and put more attention into its application store, as Apple is "chipping away" at the corporate market that was once solidly RIM's domain.

As for Apple, the company shipped 8.4 million iPhones worldwide during the quarter-a strong jump from the 5.2 million it shipped a year earlier, but down from the 8.8 million of the quarter before, according to Strategy Analytics. In order to keep seeing growth, the report said, Apple will need to sign up with more carrier partners in the United States, China and Japan, despite tensions this may cause with existing partners.

"The honeymoon period for Apple in the mobile world is clearly coming to an end," Mawston wrote, referring to a quarter during which Apple manufacturing partner Foxconn repeatedly made headlines due to the deaths of approximately a dozen of its workers, and Apple's iPhone 4 met with intense criticism over its antenna design. During the second half of the year, he said, Apple will need to work hard to ensure that its lost "heart share" doesn't translate to lost market share.

In addition to being a lesson to Apple, Mawston described the "antenna-gate" saga-as Apple CEO Steve Jobs jokingly referred to the matter during a news conference-as highlighting two important issues in the growing smartphone market: the increased risk of failure that vendors face as smartphone designs become more complex, and the importance of how vendors and carriers handle problems that arise.

"Apple's relatively slow response to the antenna problem caused a flood of negative media headlines," Mawston wrote. As a consequence, he said, the iPhone brand is now "more vulnerable to competitive attacks from rivals like Nokia, Android, BlackBerry and Motorola."