The global market for mobile phones in year 2000 was not over 400m units, as is generally believed, but under 400m units (to end-users). The generally accepted number for handsets shipments during Y2K is about 410m units, a number which is also accepted here. However, here it is held that this number was indeed the sum of sales from manufacturers. Global retail sales (to end users) were considerably smaller, though, because of very significant excess inventory build-up in the retail link during Y2K, probably about 17m units. One reason for this build-up may be that Q4.2000 was not quite as strong - relatively – as Q4 of 1998 and 1999. 
So, as a basis for understanding what happened in the global handset market during 2001, it is here suggested that global retail handset market in Y2K was actually below 400m units, namely only 410-17=393m units. Likewise, it is suggested that there was also some excess inventory build-up already during 1999, possibly ~9m units. Therefore the 1999 retail handset market was not 284m units, but only 275m unit. This in turn means that by the beginning of 2001 there was excess inventory at the retail link of some 25m units (8m+17m). Some excess retail inventory, 15m units, was cleared during 2001. The sum of sales from manufacturers during 2001 was about 380m units (7% smaller than the 410m units in Y2K). But retail handset sales in 2001 were 380+15=395m units, i.e. largely the same as the 393m units in the year 2000. The W. European retail handset market dropped by 21% in 2001, but China increased by about 49%, making it the largest handset market in the world in 2001 ahead of the USA. For the first time, the economic life-time of mobile phones increased during 2001, following a reduction of handset subsidies in W. Europe, and an economic downturn in the USA, limiting the growth of the replacement market. Also, in W. Europe as well as in several other markets, saturation took effect. At the same time some operators shifted emphasis from growth in subscriber numbers to Average Revenue Per Users, and post-pay users, thus limiting the growth in the new users market (corresponding to net additions of customers).  

During the year 2000 there was an unprecedented boom in the European mobile communications market, both with respect to absolute growth in the number of users and the associated handset sales, not least in Germany where the number of mobile phones in use more than doubled. By the end of the year 2000, Germany had the greatest number of mobile phone users in any European country, clearly ahead of Italy and the UK. The mobile phone density in Western Europe was over 62% by the end of the year 2000, up from 40% by the end of the year 1999 and 24% by the end of the year 1998. But one in ten phones are not actively used and some people actually use more than one mobile phone. This means that by the end of the year 2000 considerably less than 62% of the Europeans had at least one mobile phone each, namely only about 50%! For direct comparison with this, about 27% of the Western Europeans were Internet (Web) users by the end of the year 2000. Finally, 1.6% of the Western Europeans were WAP-service users by the end of the year 2000. Three years further down the line, by the year 2003, reported mobile phone density in Western Europe may be as high as 82%! After adjusting for a foreseen increased share of inactive phones among the reported number of activated phones, and increased tendency for people to actually use more than one mobile phone, this means that about 63% of the Western Europeans will actively use at least one mobile phone each. For direct comparison with this, about 45% will be active Internet (Web) users at home, at work and/or elsewhere. Correspondingly, by the end of the year 2003 about 9% of the population in Western Europe (of about 401m by then) will be WAP service users, i.e. one fifth of the number of the Web users. It is thus concluded that in the foreseeable future there will still be more fixed line Internet users than mobile Internet users, even in Western Europe. However, SMS usage is now significant and booming. 
 
Mobile phone density was more than twice as high as Internet penetration in most parts of the world by the end of the year 2000, but not in the USA where Internet penetration is still higher than the mobile phone density. Mobile phone density jumped 8 percentage points in the USA during the year 2000 to 39.3% by the end of the year. In the world as a whole, there were almost twice as many mobile phones in use as Internet users: 7% Internet penetration vs. 12% mobile phone density, Y2K. The term ‘density’ signals that the mentioned percentages have not been adjusted for multiple phone usage. This also means that by 2003 the mobile phone density will approach and even exceed 100% in some countries, for example in Italy. The upper long-run limit of the reported mobile phone density (the saturation level) is about 88%, in general but higher in some countries, depending on reporting practices and the percentage of pre-pay users. The number of M phones in use world-wide by the end of 1999 were 480 million, which reached 730 million by the end of the year 2000, 934 million in 2001, looks set to reach 1.09 billion by the end of the year 2002, and will then increase to 1.22 billion the following year. By the middle of the year 2000, China slipped past Japan with respect to the number of cellular phones in use. During the second half of year 2001 China overtook the USA as the single country in the world with the greatest number of mobile phones in use. Western Europe as a whole will still count over a hundred million more M phone users than China by the end of 2003. China was the greatest positive surprise in the global mobile phone market during 2001, with about 58 million additional (new) users. In 2001 China became the worlds largest handset market, in unit sales volume, ahead of the USA. - Brazil will be heading for 58 million mobile phone users – and China 280m - by year-end 2005. 
 
The market for mobile handsets can be split into the new user market and the replacement market, where the new user market is derived directly from the year on year net increase in the number of mobile phones in use. The size of the replacement market, on the other hand, depends on the historical installed base of mobile phones in use AND the economic lifetime of mobile phones. The latter is rather short, namely only about 28 months as a world-wide average (2001), up from 26 in Y2K. During year 2001 there was an extraordinary inventory build-down in the retail link of about 15 million units. This means than sales on the retail market was significantly larger than the sum of sales from all manufacturers. The retail market for mobile phones was thus about 395 million units in the year 2001, although the sum of sales from manufacturers was just 380 million units in 2001. From 1998 to 1999 the lifetime dropped 9%, and droped further 2.4% from 1999 to 2000. In now appears that lifetime increased as much as 9% from 2000 to ’01 to 28 months. Will increase to 32 months in 2002. Relatively low-priced pre-pay phones have increased their share of the number of mobile phones in use and of handset sales, and subsidies are heavy for post-pay. These are some of the reasons why average retail market prices and the average economic lifetime of mobile phones had been dropping until and including year 2000. In 2001, the replacement market accounted for about 48% of the world-wide handset market. Because of the very high growth in the Western European market during year 2000, Europe accounted for a record high percentage of the world-wide handset market in the year 2000, namely 35% (up from 33% in 1999), but the share of W. Europe dropped to 28% in 2001. The Western European handset market will remain large. After a significant drop in 2001 (of 21%), the W. European handset market will be smaller in 2003 than it was in year 2000, namely about 128m units. Its share will drop to 28% in 2003, at which time it will still be twice as large as the Chinese handset market (13%). 
 
In Japan subscribers to DoCoMo’s propitiatory i-mode service are following a considerably steeper penetration curve than WAP phones in Western Europe. However, the market structure in Japan is completely different from that in Europe, which is one of the reasons why i-mode’s tremendous success in Japan can hardly be replicated in another environment. The success of SMS in Europe almost matches that of i-mode in Japan.