"The mobile phone market is showing the first signs of improvement since the onset of the economic crisis," says Ramon Llamas, senior research analyst with IDC's Mobile Devices Technology and Trends team. "During the third quarter, we saw a number of channels promoting older devices at significantly lower prices. For many, this was enough to spur demand and push volumes higher. Now that we have moved into the fourth quarter, vendors are setting the stage for further gains by launching their flagship devices to meet pent-up demand."

"Although some regions are still reeling from problems associated with the economic crisis, the third quarter served to cleanse the channel while providing the signs of stability necessary for additional improvement in the fourth quarter," says Will Stofega, research manager of IDC's Mobile Devices Technology and Trends team. "Despite the outlook for a slower economic recovery, we think vendors should increase R&D spending as well as engage in a broad portfolio review in order to ensure the best competitive stance as the market recovers."

Regional Analysis

The North American market posted mixed results for 3Q09. The United States posted positive results, with converged mobile devices and prepaid handsets once again driving growth. Meanwhile, the Canadian mobile phone market declined for the third straight quarter despite double-digit converged mobile device growth. The tepid Canadian economy, shrinking traditional phone segment, and inventory clear out by the largest service providers led to the market's weaker three-month performance.

The Latin American mobile phone market did not experience a strong recovery in 3Q09 as expected. Longer replacement cycles, anemic user demand, and decreased handset subsidies in select countries all negatively impacted shipment volumes during the quarter. Challenges are expected still as Mexico, one of the key countries in Latin America, will experience a 'perfect storm' of tax increases for telco services, personal taxes, and value-added taxes, which will all negatively impact handset sales.

The Western European market showed strong signs of recovery. For the first time this year, both traditional mobile phone and converged mobile device shipments increased year over year as well as sequentially. The price erosion from converged mobile devices and low-end handsets contributed to this vitality along with the new feature phones from LG and Samsung targeting mid-tier segments. In CEMA, the market continued to recover from the previous three months but was still depressed in comparison with a year ago.