Handset Industry 2006 Master

Handset_Industry_20060724Asia Pacific Equity Research
24 July 2006

Handset Industry
Lower seasonality and slowing Y/Y growth in 2H06
Top 5 handset OEM shipments increased 4.7% Q/Q and 31.2% Y/Y in 2Q06 as their market share decline Q/Q. Amongst the Top 5 only Motorola and Sony Ericsson (SE) gained share and saw their operating margins increase sequentially implying that “Other" handset makers gained share. Nokia expects 3Q06 Q/Q market growth to be lower than Q/Q growth in 2Q06 (Nokia estimate 7%) clearly indicating slowdown in seasonality and implying below 20% Y/Y growth in 3Q06. Nokia expect to maintain market share in 3Q06 (with possible upside) but Motorola expects to continue to gain share and Sony Ericsson also provided bullish comments for the overall market. Even though both Nokia and Motorola maintai