Android Helps Push Smartphone Shipments Up 50.5% in Second Quarter

Smartphone shipments and phones based on the Android operating system posted double-digit second-quarter gains despite a still-weak economy, according to a Gartner research report released today.

Overall mobile phones posted a 13.8% increase in worldwide shipments over the same time last year, up to 325.6 million units in the second quarter. But smartphones delivered the truly stellar performance, with sales soaring 50.5% to 61.6 million units in the quarter.

Driving the growth was Apple's (AAPL) popular iPhone 4, which began shipping towards the end of the second quarter, along with new offerings from HTC and Motorola (MOT). Gartner noted that smartphone sales were not affected by all the tablet computers -- which some industry watchers consider smartphones on steroids -- hitting the market.

The Rise of Android

One of the most interesting smartphone developments for consumers and investors is the rapid rise of Google's (GOOG) Android operating system. Android-based smartphones, such as Motorola's Droid lineup and HTC's EVO, grabbed the number one spot in the U.S. for mobile operating systems, jumping ahead of Research In Motion (RIMM) and Apple.

Globally, in terms of operating systems, Android phones shipped more units than Apple's iOS-based iPhone, squeezing it into the number three spot behind RIM and Symbian.

mobile phone operating system market share
mobile phone operating system market share

Gartner attributes Android's rapid rise to several factors, including its non-exclusive deals with communication service providers and manufacturers and its ability to offer a range of prices for its devices. (As of this past February, 26 different phone models were using Android and 60,000 phones built on the operating system were sold every day.)

Carolina Milanesi, Gartner's research vice president, also noted that Apple's smartphone results would have likely been higher if it hadn't curtailed production for its non-iPhone 4 devices as it prepared to offer up the new handset. The company also faced some issues with supply constraints.

Apple Still Strong

Despite these hurdles, Apple didn't fare too badly. It retained its number seven spot on a worldwide basis and its number three position for smartphones only. "The data included in the Gartner report takes into account less than a week of iPhone 4 sales," said an Apple spokesman. "Just wait until next quarter."

total mobile phone vendor market share
total mobile phone vendor market share

Other highlights from the report: Nokia (NOK) retained its number one rank, though it lost ground to some of the other players, specifically in the high-end sector. And HTC posted the largest gain in the quarter, moving to 1.8% market share from 0.9% a year ago on the strength of such phones as its EVO. Gartner attributes its rise to a popular portfolio of Android-based phones and an aggressive branding effort.

Motorola, meanwhile, posted the largest drop, falling to 2.8% of the market share, from a market share of 5.6% a year ago. Buyers were apparently holding back as the company geared up to launch its Droid X phone, which is currently sold out.

Although mobile devices saw double-digit shipment growth in the second quarter, it came at a cost. Gartner noted that the average selling price (ASP) per unit in the second quarter fell more steeply than anticipated and profit margins fell.

"We attribute the decline in ASPs to a stronger dollar, a depreciating euro, and intense competition that drove price adjustments and changes to the product mix," Milanesi said. For example, LG posted a 27.8% drop in their ASP during the quarter, after battling with Samsung for market share in the low-margin of the market.