Reuters | Jun 7, 2011, 11.16am IST
NEW DELHI/HELSINKI: From New Delhi to Shanghai to Johannesburg, a flood of cheap handsets from the likes of China's ZTE and India's Micromax is destroying Nokia's top position in emerging markets.
Compounding the woes for the Finnish phone maker, Asian handset manufacturers are increasingly turning to Google's free Android software, which is popular with operators and consumers in cut-rate markets.
Nokia is already under pressure in the high-margin smartphone sector as Apple, Blackberry maker Research In Motion and Google seize market share, leaving the basic cellphone business as Nokia's most valuable part. That is now under threat.
"Three years ago Nokia's position in emerging markets looked impenetrable, but low-cost chipsets and growing scale has helped a number of Asian manufacturers to price aggressively and seize market share," said CCS Insight analyst Geoff Blaber in London.
"The 'lean mean phone-making machine' that used to dominate the sub $50 space has come under huge pressure from agile rivals."
Last week, Nokia abandoned hope of meeting key targets just weeks after setting them, blaming difficult conditions in China and Europe. Its shares slumped 18 per cent in one session on scepticism about its strategy to team up with Microsoft for Windows Phone software in the smartphone war.
The battle for the cheap phone market could be even tougher. Nokia has been able to rely on its brand and distribution chain across emerging markets, home to 1.7 billion mobile phone subscribers.
But ZTE and larger Chinese rival Huawei Technologies, which have traditionally been in the network equipment business, are aggressively muscling in on mobile devices.
ZTE expects to ship more than 80 million handsets this year, up by a third from last year's 60 million units, a senior executive told Reuters in April. Key markets for ZTE's handsets include China and Europe.
Huawei has targeted shipments of 60 million handsets this year, even marketing its devices in glitzy Beijing malls and a Milan fashion show to raise its profile.
"They are already familiar with what the operators are looking for," said Melissa Chau, research manager for client devices at IDC Asia Pacific in Singapore, referring to ZTE and Huawei.
"At the very low-end, they offer handsets at very low prices in huge bulk shipments to operators."
Demand for low-end cellphones has surged across emerging markets since the global economic crisis began to ease in 2009. However, Nokia's sales of basic cellphones has fallen for three straight quarters. In January-March, Nokia sold 84.3 million non-smartphones, 2 per cent less than a year ago.
Crumbling market share
"Nokia should really have begun this fight back two years ago and leaving it so late in the day puts the vendor in a very tough competitive position," said Neil Mawston, analyst at research firm Strategy Analytics.
Some of the Asian vendors are hardly household names. But in China, the biggest competitive threat comes from manufacturers that have no name at all.
So-called no-brand manufacturers -- small Chinese firms using chipsets from Mediatek or Spreadtrum Communications Inc -- control 45 per cent of the market in the world's most populous country. Nokia's market share in China has shrunk to 19 per cent from 33 per cent two years ago.
No-brand Chinese manufacturers have also expanded into Africa, India, Latin America and Russia over the last year, research firm Gartner says. In total, they sell more phones than Nokia, said Gartner.
Analysts expect these manufacturers to focus next on cheap smartphones running Android software. In India, Nokia is in a bruising fight. The company is jostling with about 150 vendors in the world's fastest-growing cellular market, home to more than 800 million subscribers and with mass market phones selling for about $20 with basic features.
Cheap handsets and phone charges as low as half a cent a minute are fuelling growth. Some Indian manufacturers, who mostly make handsets in China and Taiwan, make net margins of only about 2 per cent, analysts said.
No-brand Chinese vendors controlled 20 per cent of the Indian market in the first quarter, with Nokia at 26 per cent, Gartner said. Only two years ago, Nokia had close to 60 per cent.
Source
Compounding the woes for the Finnish phone maker, Asian handset manufacturers are increasingly turning to Google's free Android software, which is popular with operators and consumers in cut-rate markets.
Nokia is already under pressure in the high-margin smartphone sector as Apple, Blackberry maker Research In Motion and Google seize market share, leaving the basic cellphone business as Nokia's most valuable part. That is now under threat.
"Three years ago Nokia's position in emerging markets looked impenetrable, but low-cost chipsets and growing scale has helped a number of Asian manufacturers to price aggressively and seize market share," said CCS Insight analyst Geoff Blaber in London.
"The 'lean mean phone-making machine' that used to dominate the sub $50 space has come under huge pressure from agile rivals."
Last week, Nokia abandoned hope of meeting key targets just weeks after setting them, blaming difficult conditions in China and Europe. Its shares slumped 18 per cent in one session on scepticism about its strategy to team up with Microsoft for Windows Phone software in the smartphone war.
The battle for the cheap phone market could be even tougher. Nokia has been able to rely on its brand and distribution chain across emerging markets, home to 1.7 billion mobile phone subscribers.
But ZTE and larger Chinese rival Huawei Technologies, which have traditionally been in the network equipment business, are aggressively muscling in on mobile devices.
ZTE expects to ship more than 80 million handsets this year, up by a third from last year's 60 million units, a senior executive told Reuters in April. Key markets for ZTE's handsets include China and Europe.
Huawei has targeted shipments of 60 million handsets this year, even marketing its devices in glitzy Beijing malls and a Milan fashion show to raise its profile.
"They are already familiar with what the operators are looking for," said Melissa Chau, research manager for client devices at IDC Asia Pacific in Singapore, referring to ZTE and Huawei.
"At the very low-end, they offer handsets at very low prices in huge bulk shipments to operators."
Demand for low-end cellphones has surged across emerging markets since the global economic crisis began to ease in 2009. However, Nokia's sales of basic cellphones has fallen for three straight quarters. In January-March, Nokia sold 84.3 million non-smartphones, 2 per cent less than a year ago.
Crumbling market share
"Nokia should really have begun this fight back two years ago and leaving it so late in the day puts the vendor in a very tough competitive position," said Neil Mawston, analyst at research firm Strategy Analytics.
Some of the Asian vendors are hardly household names. But in China, the biggest competitive threat comes from manufacturers that have no name at all.
So-called no-brand manufacturers -- small Chinese firms using chipsets from Mediatek or Spreadtrum Communications Inc -- control 45 per cent of the market in the world's most populous country. Nokia's market share in China has shrunk to 19 per cent from 33 per cent two years ago.
No-brand Chinese manufacturers have also expanded into Africa, India, Latin America and Russia over the last year, research firm Gartner says. In total, they sell more phones than Nokia, said Gartner.
Analysts expect these manufacturers to focus next on cheap smartphones running Android software. In India, Nokia is in a bruising fight. The company is jostling with about 150 vendors in the world's fastest-growing cellular market, home to more than 800 million subscribers and with mass market phones selling for about $20 with basic features.
Cheap handsets and phone charges as low as half a cent a minute are fuelling growth. Some Indian manufacturers, who mostly make handsets in China and Taiwan, make net margins of only about 2 per cent, analysts said.
No-brand Chinese vendors controlled 20 per cent of the Indian market in the first quarter, with Nokia at 26 per cent, Gartner said. Only two years ago, Nokia had close to 60 per cent.
Source
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