Cell Phones Still Ringing Off the Hook

It's only the halfway mark, but already cell-phone sales are looking like the Lance Armstrong of tech.

Worldwide handset shipments reached 190.5 million units in during the second quarter, a 21% increase from the year-ago period, according to a Gartner tally released Thursday. The torrid sales pace in the typically slow first half of the year, combined with a usually robust Christmas season, promises a record sales number for 2005.

Analysts and industry executives predict that the handset sales growth rate this year will be somewhere in a range between 13% to 15%, with about 750 million units shipped. That compares with the record 20% growth last year, with 630 million units sold.

And as the mobile-phone momentum continues, so does the consolidation of business into fewer phone-making hands.

Maintaining its lead, handset king Nokia (NOK Quote - Cramer on NOK - Stock Picks) gained 2.3 percentage points of market share in the second quarter over a year ago, and 1.5 points sequentially over the first quarter. The increase brought its total market share to 31.9%.

Meanwhile, No. 2 Motorola (MOT Quote - Cramer on MOT - Stock Picks) also gained ground, rising to 17.9% market share in the second quarter from 16.8% in the prior quarter and 15.7% in the year-ago period.

The gains came at the expense of No. 3 and No. 6 phonemakers Samsung and Siemens (SI Quote - Cramer on SI - Stock Picks), as well as a roster of smaller players.

"As we've seen for a while now, the big get bigger," says American Technology Research analyst Albert Lin.

Consolidation among the telcos has helped reinforce this trend.

Large carriers increasingly choose to deal with the big proven phonemakers that offer the kind of support they need and a willingness to accept phones the telcos want to return, says Lin.

One example of how the strong stay that way is Russia, says Lin. As a new market, the Russians had no established cell-phone industry. Every player started from the same point. But within a year or two, says Lin, Russia's handset market looked like the rest of the world -- and Nokia and Motorola were No. 1 and No. 2.

One slight surprise in the second quarter, says Lin, is the growing portion of cheap phones being sold. "I think a lot less high-end phones were sold than people expected," says Lin.

This would suggest that the growth in third-generation, or 3G, video phones has yet to materialize.