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Google Inc.(GOOG) was the biggest beneficiary of strong global handset sales in the second quarter, as smartphones based around its open Android platform outperformed peers.
Shipments of Android-based devices, such as HTC Corp's (2498.TW) Desire and Sony Ericsson's (SNE, ERIC) Xperia X10, surged to 10.6 million units, increasing the operating system's market share to 17.2% from 1.8% at the expense of rival platforms such as Symbian -- the main operating system in Nokia Corp's (NOK) smartphones.
Android has already overtaken Apple Inc's (AAPL) iPhone OS and will probably outgrow Research in Motion Ltd's (RIMM) Blackberry OS before the end of the year to become the world's second-largest smartphone platform after market leader Symbian as vendors continue launching new devices around the system, said Gartner research vice president Carolina Milanesi.
But Gartner warned that while mobile phone sales increased 13.8% in the quarter and smartphone sales continued to outgrow the wider handset market rising 51%, vendors' margins and average selling prices were hit by intense competition, a stronger U.S. dollar compared with the euro, and attempts by vendors such as Samsung Electronics Co. (005930.SE) and LG Electronics Inc. (066570.SE) to win shares in the low-margin market.
Most major vendors have seen selling prices fall, and there is little they can do about it, Gartner research vice president Carolina Milanesi told Dow Jones Newswires.
Competition is fierce and consumers are also getting used to buying ever more advanced handsets without paying more, mirroring the way the PC market has been for some time, said Milanesi.
Still, she said sales of high-priced smartphones may get a boost as service providers are likely to introduce more flexible data plans.
Service providers have so far offered expensive data plans with unlimited traffic for a fixed price which mainly appeal to advanced users, but the option to sign up for a cheaper plan with limited data usage could attract a wider group of consumers to the smartphone segment, Milanesi said.
"Launches of updated operating systems will help maintain strong growth in smartphones in the second half of 2010 and spur innovation," Milanesi said, adding that the market for operating systems is likely to consolidate around those platforms which have the most support from service providers, developers and consumers.
Fragmentation is the main danger to Android's success as there are multiple versions of the platform in the market and some consumers get confused about which features are supported in which devices, said Milanesi.
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