As mobile customers look to equip phones that can do more, the market for non-smartphones will continue to decline. According to the IDC’s Quarterly Mobile Phone Tracker, the market for smartphones will grow four times faster than the overall mobile phone market.

“Overall market growth in 2010 was exceptional,” said Kevin Restivo, senior research analyst with IDC’s Worldwide Quarterly Mobile Phone Tracker. “Last year’s high market growth was due in part to pent-up demand from a challenging 2009, when many buyers held off on mobile phone purchases. The expected market growth for 2011, while still notable, will taper off somewhat from what we saw in 2010.”

The IDC report also projected market share for particular devices, saying that the Android operating system will take over the #1 spot by a wide margin in 2011. It is projected to garner 39.5% of the market. The next closest competitor is projected to be the Symbian OS, with 20.9% share.

The recent news that Nokia will abandon the Symbian OS in favor of the Windows phone has greatly shifted projections for 2015. The Windows phone is now looking to take over the #2 spot in 4 years, according to the IDC: “The new alliance brings together Nokia’s hardware capabilities and Windows Phone’s differentiated platform. We expect the first devices to launch in 2012. By 2015, IDC expects Windows Phone to be number 2 operating system worldwide behind Android.”

Apple’s share decreased from 93 percent in Q310 to 73 percent in Q410, but still showed its solid leadership position. The Samsung Galaxy Tab was the main competitor during the holiday season, accounting for more than 17 percent share.

IDC found that the eReader market also increased significantly in the fourth quarter. Strong sales of Amazon’s Kindle, as well as significant gains from competitors such as Pandigital, Barnes & Noble, Hanvon, and Sony among others, contributed to market growth.

In Q410, the eReader market more than doubled volume from the previous quarter, with more than 6 million units shipped for the quarter, bringing the full-year total to 12.8 million units shipped. eReader shipments were also up more than 325% from 2009 when roughly 3 million units shipped.

“Strong holiday sales of media tablets were in line with IDC projections and strong consumer interest in the category while device vendors scrambled to offer products competitive with Apple’s iPad and now iPad 2,” said Loren Loverde, vice president, Consumer Device Trackers.

“Media Tablets are on pace to reach shipments of roughly 50 million units in 2011.”

According to IDC, the United States, Western Europe and Asia/Pacific (excluding Japan) regions accounted for 89% of all media tablet shipments in 4Q10. Although the United States remained the largest country market, Western Europe and Asia/Pacific (excluding Japan) grew almost twice as fast from Q310 to Q410 and Western Europe saw a slightly larger jump in shipments in 4Q10.

In Q410, retailers were the channel with the highest share of shipments, followed by direct and telco sales. A new channel for media tablets, the telco operators, accounted for nearly 14% of all shipments of media tablets in 4Q10

Vendors shipped 401.4 million units in Q4 compared to 340.5 million units in Q4 of 2009. Vendors shipped a total of 1.39 billion units on a cumulative worldwide basis in 2010, up 18.5% from the 1.17 billion units shipped in 2009.

The strong quarterly and annual growth comes after a weak 2009, which saw the market decline by 1.6%. A stronger economy and a wider array of increasingly affordable smartphones helped lift the market to its highest annual growth rate since 2006 when it grew 22.6%.

"The mobile phone market has the wind behind its sails," said Kevin Restivo, senior research analyst with IDC’s Worldwide Mobile Phone Tracker.

"Mobile phone users are eager to swap out older devices for ones that handle data as well as voice, which is driving growth and replacement cycles."

It’s not just smartphone-focused suppliers that capitalized on the mobile phone market’s renewed growth last year. ZTE, a company that sells primarily lower-cost feature phones in emerging markets, moved into the number 4 position worldwide in 4Q10. It is the first quarter the Chinese handset maker finished among IDC’s Top 5 vendors.

"Change-up among the number four and five vendors could be a regular occurrence this year," added Ramon Llamas, senior research analyst with IDC’s Mobile Devices Technology and Trends team.

"Motorola, Research In Motion, and Sony Ericsson, all vendors with a tight focus on the fast-growing smartphone market who had ranked among the top five worldwide vendors during 2010 are well within striking distance to move back into the top five list."

Smartphone vendors shipped a total of 81.1 million units, up 89.5 percent from the 42.8 million units shipped during Q309. For the first three quarters of 2010, vendors have shipped a total of 200.6 million units, up 67.6% from the 119.6 million units shipped during the first three quarters of 2009.

"That the smartphone market has grown nearly ninety percent from last year and more than six times the overall mobile phone market indicates strong demand worldwide and vendors’ collective ability to meet that demand," said Ramon Llamas, senior research analyst with IDC’s Mobile Devices Technology and Trends team.

"Increasingly, users look to smartphones as their next devices while carriers have broadened selection and offered generous subsidies. To keep up with demand, vendors’ plans to emphasize smartphones in their portfolios have resulted in sharp growth as evidenced by Motorola, Samsung, and Sony Ericsson. We expect more vendors to do the same."

By the end of 2010, IDC expects more than 20% of all devices shipped to partners worldwide will be converged mobile devices, the first time this has occurred. In comparison, 15% of all devices shipped in 2009 were converged mobile devices.

"Smartphone makers have the wind behind their sails," said Kevin Restivo, senior analyst, Mobility, at IDC. "The market transition to smartphones is proceeding at a brisk and unabated pace."

Nokia landed in the top spot in Q3, shipping 26.5 million units with a 61.6 percent increase year-over-year, followed by Apple with 14.1million units and a 90.5 percent increase. RIM came in third, shipping 12.4 million units with a 45.9 percent increase, followed by Samsung, shipping 7.2 million units with a 453.8 percent increase year-over-year. HTC was fifth, shipping 5.8 million units with a 176.2 percent increase.

“The other important development during the quarter was how vendors are seeding the market for future growth," said Llamas. "BlackBerry, iPhone, Microsoft, and Symbian all announced or launched refreshed operating systems, with each one providing an improved user experience over its predecessor.”

“While these new operating systems initially appear on high-end devices at launch, they provide a glimpse of what the broader smartphone market will look like next year as the OS finds its way into more devices in the market."

Smartphone vendors shipped a total of 63 million units in 2Q10, compared to 41.9 million units in the same period one year ago. For the first half of 2010, vendors shipped a total of 118.3 million units, up 54 percent from the 76.8 million units shipped during the first half of 2009.

Google’s smartphone partners, such as HTC and Samsung, posted the highest year-over-year growth rates among the top 10 vendors in 2Q10. Four out of the ten vendors, who primarily ship Android-powered smartphones, experienced year-over-year growth rates of more than 100 percent. The top suppliers of Android devices last quarter, on a unit shipment basis, was HTC.

Emerging smartphone suppliers, such as HTC, that are allied closely with Google gained share at the expense of the historic top smartphone players last quarter," says Kevin Restivo, senior research analyst with IDC’s Worldwide Mobile Phone Tracker program.

"This is largely a result of greater consumer interest in smartphones generally and Android devices in particular."

Nokia was the top smartphone vendor in 2Q10 with 38.1 percent of the market followed by BlackBerry maker Research In Motion with 17. 8 percent. Apple captured 13.3 percent of the smartphone market, followed by HTC at 7.6 percent and Samsung with 4.8 percent.

"The worldwide smartphone market will continue this explosive growth in the second half of 2010, setting up a critical starting point for 2011," says Ramon Llamas, senior research analyst with IDC’s Mobile Devices Technology and Trends team.

"That more smartphone models will be launched is a given, but just as important is the anticipated launch of several refreshed operating systems. Both BlackBerry and Symbian^3 are poised with fresh, yet familiar experiences while Windows Phone 7 promises a complete break from previous versions. All these are expected to launch in the second half of 2010, and their reception among end-users will indicate their future in this fast-growing segment of the market for 2011 and beyond."
 

Mobile phone vendors shipped 317.5 million units during the second quarter, an increase of 14.5% from the 277.2 million units shipped during the second quarter of 2009. For the first half of 2010, vendors shipped a total of 620.6 million units, up 18.5% from 523.5 million units for the same period last year.

"That worldwide growth was driven primarily by vendors outside the top vendors is particularly noteworthy," said Ramon Llamas, senior research analyst with IDC’s Mobile Devices Technology and Trends team. "Directly contributing to this is growth in the smartphone category. Companies with a strict focus on the smartphone market, like RIM, Apple, and HTC have clearly benefited from steadily increasing user interest. But it’s not just smartphone vendors that have driven the market forward – it’s also the companies with a presence among entry-level handsets and mid-range devices, which have long been the domain of the worldwide leaders.

"To dismiss the worldwide leaders would be a mistake," added Llamas. "Each currently enjoys broad distribution, a deep portfolio, and brand recognition. Moreover, each is in the midst of refreshing its respective product portfolio, with greater emphasis on smartphones during the second half of this year. 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."

IDC analyst Kevin Restivo says some traditional mobile phone makers and brand owners have gained share due to higher volumes of lower-cost models, which are increasingly popular with wireless service providers.

Another recent study found an up-tick in cheap knockoff phones.
 

"Software theft exceeded $51 billion in commercial value in 2009. The public and private sectors need to join forces to more effectively combat an epidemic that stifles innovation and impairs economies on a global scale," said BSA President and CEO Robert Holleyman.

A 43 percent piracy rate means that for every $100 worth of legitimate software sold in 2009, an additional $75 worth of unlicensed software also made its way into the market.

"Software theft hurts not just software companies and the IT sector, but also the broader economy at the local, regional and global levels by cutting out service and distribution firms," said John Gantz, chief research officer at IDC.

"Lowering software piracy by just 10 percentage points during the next four years would create nearly 500,000 new jobs and pump $140 billion into ailing economies."

In the United States, software piracy remained at 20 percent, the lowest level of software theft of any nation in the world. The study noted that given the size of the PC market, the commercial value of pirated software in the United States was $8.4 billion in 2009.

Additional findings include:

*Piracy rates increased in 19 global economies, up from 16 in 2008.
   

 *The factors driving up the global piracy rate include growth in the consumer PC base and in emerging markets – both segments with high piracy rates:
   

*Globally, PC shipments to consumers rose 17 percent in 2009, while shipments to businesses, governments and schools dropped 15 percent.
   

*The PC markets in Brazil, India and China accounted for 86 percent of the growth in PC shipments worldwide.
   

*For every dollar of legitimate software sold, another $3-4 in revenue is created for local firms.
   

*China saw the largest increase in the commercial value of pirated software of any country – growing $900 million to $7.6 billion.
   

*India, Chile and Canada each saw the greatest improvement in reducing software theft, each achieving a 3 percentage point decline in their piracy rates in 2009.

"Given the economy, 2009 piracy rates are better than we expected. But incremental improvements are not enough. Few if any industries could withstand the theft of $51 billion worth of their products. To foster innovation and maximize the economic impact of the IT industry, governments must act – particularly those in fast-growing, high-piracy countries," said Holleyman.

Vendors shipped 294.9 million units in the first quarter of 2010 compared to 242.4 million units a year earlier.

Smartphones and a recovering traditional mobile phone category helped the market avoid a repeat of Q109, when the market dove 16.6 percent during the recession.

Growing demand for smartphones also helped Research In Motion (RIM) move into the top 5 vendor rankings for the first time. RIM, which replaced Motorola in the top 5, tied Sony Ericsson for the number 4 position in IDC’s Q110 vendor rankings. RIM shipped 10.6 million units in the first quarter while Motorola, which had been a top 5 vendor since the start of IDC’s Worldwide Quarterly Mobile Phone Tracker in 2004, shipped 8.5 million units. Motorola, the number 2 overall vendor in 2004, landed a fifth place finish last year due to its overall strength in the lower-growth traditional mobile phone category. Motorola has steadily lost share since 2004 when the market started its shift toward higher-end feature phones and smartphones. The ongoing shift has given rise to mobile device vendors such as RIM and Apple.

"That the mobile phone market has rebounded by double digits year over year in a post-holiday quarter is definitely good news for the industry," said Ramon Llamas, senior research analyst with IDC’s Mobile Devices Technology and Trends team.

"Whereas last year we saw much uncertainty around demand and overall reluctance to introduce new devices, vendors have been very vocal about their intentions this year, with some even launching new devices in the first quarter of 2010. In addition, the continued emphasis on converged mobile devices points to greater revenue generation and profitability opportunities for vendors, which is a welcome change compared to the same quarter a year ago."

IDC said it believes the worldwide mobile phone market rebound will continue in 2010, though not at the same growth rate as the first quarter.

"It should be noted that the market’s first-quarter growth, while impressive, is relative to one of the worst quarters in mobile phone industry history (1Q09)," said Kevin Restivo, senior research analyst with IDC’s Worldwide Mobile Phone Tracker.

 "The market’s growth should not be taken as a proxy for future quarters nor annual growth. In fact, the results essentially match our first quarter projections. We are still expecting growth of 11% for 2010."
 

The smartphone market has a constantly shifting mobile operating system (OS) landscape. In a market once ruled by BlackBerry, Symbian, and Windows Mobile, new players with open standards (Android) and intuitive design and navigation (Mac OS X and webOS) have received strong user and handset vendor interest.

"Mobile operating systems have become the key ingredient in the highly competitive mobile device market," said Stephen D. Drake, vice president, Mobility and Telecom.

"Although the overall look and feel of the device will still play an important role in the buying process, the wrong choice of operating system coupled with an awkward user interface can mean the difference between success and failure."

Symbian will hold onto its top spot worldwide throughout the forecast period. Due mainly to the strength of Nokia in markets outside of the United States, Symbian continues to lead all other mobile operating systems.

Android will experience the fastest growth of any mobile operating system. Starting from a small base of 690,000 units in 2008, total Android shipments will reach 68 million unites by 2013, making for a CAGR of 150.4 percent. Android will benefit from having a growing footprint of handset vendors supporting it and will finish second to Symbian in shipments by 2013.

Linux and webOS shipments will struggle throughout the forecast period. Shipments of Linux-powered devices will trend down due to greater emphasis on the Android platform but will not go away entirely as some vendors will continue to support it. Palm’s webOS, despite growing steadily, will capture limited market share due to limited deployment and availability of devices across multiple carriers.

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The U.S. PC market reached a new record of nearly 20.7 million units shipped in the fourth quarter of 2009 (4Q09), resulting in year-on-year growth of 24 percent. Other regions also experienced solid growth, particularly emerging markets in Asia/Pacific and Latin America, leading the global market to 15.2 percent year-on-year growth for the quarter. According to IDC, this marked the first quarter of double-digit volume growth since 3Q08.

Along with continuing price cuts throughout the year, other factors were in play in the fourth quarter. Following a number of improving economic indicators, which began in 3Q09, pent-up demand led buyers to focus on a variety of value-oriented notebooks that dominated the landscape in the holiday season.

"The U.S. market exploded in the fourth quarter, driven by a series of factors contributing to the unexpected 24% year-on-year growth. First is the rubber-band effect and recovery from the year-ago quarter, which suffered from buyer contraction when the economic crisis was confirmed," said David Daoud, research manager, IDC U.S. Quarterly PC Tracker.

"The vendors responded with new low price points to stimulate demand and face competition. In this context, low-cost notebooks and mininotebooks were the biggest contributors to the successful fourth quarter. Once again, the consumer market overcame the weak commercial sector to save the quarter."

When it came to vendors, HP had strong market performance in all regions except Europe, Middle East and Africa (EMEA), with solid shipments in the U.S. from holiday retail sales. It also gained double-digit growth in the emerging markets of Asia/Pacific and Latin America.

Dell moved back into positive territory after four quarters of yearly declines. The company managed overall growth of 5 percent and gains of 24 percent in Asia/Pacific (excluding Japan).

"The market has weathered a storm which looks to be behind us," says Jay Chou, research analyst, Worldwide Quarterly PC Tracker.

"But salvaging decreasing margins will soon become even more pertinent as one considers the long-term effects of holding market share at the cost of profitability. Without an effective strategy to convey a clear usage model and feature set tied to each segment, the market will inevitably continue down the slippery slope of ‘good-enough’ computing sold to the lowest bidder."

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