An increasingly heated battle in the global smartphone market is set to weigh on handset vendors' profit margins during the remainder of the year, analysts said on Friday.
All top cellphone vendors, including Nokia, Samsung Electronics and Research in Motion, are rolling out new smartphone models for the holiday sales-fueled fourth quarter.
We expect the second half of the year to be categorized by an escalation in the 3G wars, as Nokia, Samsung, LG, RIM, Sony Ericsson, Motorola, ZTE, Huawei and others flood the market with smartphones and superphones in their attempts to gain share in these high-value markets, Strategy Analytics said.
The ramp-up in supply will drive higher volumes, but this will inevitably place downward pressure on margins as vendors fight to outsmart rivals, the research firm said.
The world's three largest cellphone makers -- Nokia, Samsung and LG Electronics -- all saw smartphone rivalry hitting their profit margins in the April-June quarter.
Each is in the midst of refreshing its respective product portfolio, with greater emphasis on smartphones during the second half of this year, said IDC analyst Ramon Llamas.
Still, the upward pressure from vendors outside the current top five vendors, particularly Apple and Motorola, will provide tough competition in the quarters to come, Llamas said.
Earlier on Friday, Samsung reported telecom division margins slumping to 7.2 percent, as it boosted marketing spending in the absence of a strong smartphone model.
Samsung is making a big bet on its top model Galaxy S, which went on sale last month, while Nokia is betting on its upcoming N8 model to win a larger share of the high-end market.
MARKET GROWING AGAIN
The cellphone market grew in April-June for the third quarter in a row, boosted by demand for low-end models in emerging markets and for high-end phones with touchscreens in mature regions.
Growth in the global cellphone market is set to slow slightly to 12 percent in the July-September quarter, but there are no signs of a major slowdown, Strategy Analytics said.
The research firm said the market grew 13 percent in April-June quarter, while rival IDC estimated on Friday the growth at 14.5 percent, and top vendor Nokia said last week the market grew 14 percent from a year ago.
There are no credible signs yet of any major double-dip downturn in the handset industry, but that could of course quickly change if overall economic conditions were to deteriorate again across the major markets, Strategy Analytics said.
The phone market saw a sharp downturn last year as consumers sapped spending on new gadgets amid a recession.
Canada's Research in Motion -- which broke into the No. 4 position in the global market last quarter -- held on to it, selling 11.2 million Blackberries in the April-June quarter, just ahead of Sony Ericsson's 11 million phones.
Both firms held roughly 3.6 percent of the global market.
Market shares of the top 3 -- Nokia, Samsung and LG Electronics -- changed little in the quarter, with Nokia holding onto 36 percent of the market, Strategy Analytics said.
Samsung holds 21 percent of the market and LG 10 percent.
(Editing by Muralikumar Anantharaman)