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Cell Phone Market Taking Another Hit

Posted on: Thursday, 4 December 2008, 07:20 CST

On Wednesday, cell phone makers LG Electronics and Research in Motion warned on profit growth, the newest sign that the market is drying up amidst economic fears.

LG, the world’s fifth-largest handset maker, said sales would slow sharply next year.  Research in Motion, maker of the popular Blackberry, cut its third-quarter profit forecast far below what analysts expected.

"The latest flurry of warnings shows the economic turmoil is impacting everyone in the mobile value chain -- from component suppliers to manufacturers, distributors and retailers right down to the consumer on the high street," said Geoff Blaber, analyst for CCS Insight.

"Demand is being impacted across the entire market.”

Nokia and Samsung, the world’s two largest makers, have already warned about the waning handset market.

Nokia is expected to disclose information on industry outlook on Thursday during an investor meeting.

Research in Motion announced that its third-quarter revenue would be $2.75-$2.78 billion, coming in 9 percent lower than the midpoint of analysts’ forecasts.

RIM also expects the number of new BlackBerry subscribers to be near the 2.6 million mark, 10 percent below a previous forecast of 2.9 million.

The company’s warning shows that even smartphones, the most profitable segment of the cell phone market, will face problems next year.

"Whilst smartphones will be a growing segment in a shrinking market next year, this is further evidence that growth looks set to slow considerably compared with 2008," said Blaber.

LG Electronics hopes to raise its global market share during the economic downturn.

"The pace of growth is set to slow noticeably," said Skott Ahn, chief executive of LG's mobile communications unit.  He also added that the previous handset growth rate of 30 percent would slow to only “slight” growth next year .

German chipmaker Infineon also announced on Wednesday that it expects to see a fall in revenue during 2009, mainly due to declining demand from car manufacturers.

This comes on the heels of last week’s announcement by STMicroelectronics, Europe’s largest semiconductor maker, that the company cut its fourth-quarter earnings due to a slowdown in the automotive, wireless, and computer markets.


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