Decline in feature phones hurts Nokia and Samsung

Decline in feature phones hurts Nokia and Samsung PART 1 OF 1

Decline in feature phones hurts Nokia and Samsung

Decline in feature phones hurts Nokia and Samsung

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The mobile device industry is driven by two major categories of products, feature phones and smart phones. Feature phones are very basic mobile phones with only voice services and text messaging ability. Smart phones conversely are a mix of a feature phone with some computing capabilities including personal digit assistants, the ability to open and manage different files, and also the ability to access the internet and send email. Despite the thought that most people have given up their feature phones for smart phones, just recently in 2011 feature phones represented 60% of the phones purchased in the U.S. and 70% of phones sold worldwide.

Decline in feature phones hurts Nokia and Samsung

The growth rates of these two mobile categories are on very different trajectories however, and to no surprise feature phones are in decline. 2011 was the first year of negative growth for feature phones with a -5.4% decline in units shipped, but 2012 is projected to be an even bigger drop with a -16.3% decline in units (final year-end 2012 numbers are not yet tabulated by the International Data Corporation). As a result, smart phones are taking share from the simpler feature phone handsets and are set to grow shipments by over 45.0% in 2012. Despite this seemingly large growth trend, even smart phone growth rates are dropping. In 2010 the smart phone category grew by over 75.0% with the following year in 2011 witnessing an over 62.0% expansion. The mixing shift between feature and smart phones has led overall mobile phone unit sales to grow marginally in 2012 at just 1.4% because of the continued prominence of feature phones in less wealthy emerging markets.

The manufacturers with the most at risk as feature phone units continue to decline are Nokia (NOK) and Samsung which both have substantial market share. Nokia is the clear leader in the feature category with 53% market share due to its focus on less developed markets globally. Samsung also has substantial share at 32% of the feature phone market, as the Korean company also has shipped a substantial number of units into Asia, a high feature phone consumer base.

Noticeably absent from the market share count of declining feature phones is Apple (AAPL) and Research in Motion (RIMM) which don’t have any mobile manufacturing classified in the category. Thus the secular decline in feature phone globally hurts Nokia and Samsung the most while sparring Apple and Research in Motion.


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