Helsinki: The fall in the handset market stopped in the third quarter, helped by clearing of inventories of unsold phones and booming sales on the so-called grey market in countries like China, research firm Gartner Inc. said on Thursday.

Recovery mode: Global handset sales volumes may grow 5-8% next year, but mostly boosted by the continuing growth on the grey market. Madhu Kapparath / Mint

Handset sales saw sharp drops earlier in the year as consumers around the world cut back on spending in the economic downturn.

However, most of the top handset vendors are missing out on growth as around 150 million phones this year will be manufactured in the grey market, by Chinese manufacturers without production licences, Gartner said.

This compares with the 117 million phones that LG Electronics Inc., the world’s third largest handset maker, is expected to sell this year.

Most of the grey-market phones use chips from Mediatek Inc.

Some of them are copies of models made by top vendors, using brand names such as Mokia, but many are not, Gartner said.

After a 0.1% growth in sales volumes in the third quarter, Gartner said it expected to see stronger growth in the fourth quarter, with 2009 phone sales roughly at par with 2008.

“Many devices will reach the market in time for Christmas, and mobile carriers will run incentives for consumers during the holidays," said Gartner analyst Carolina Milanesi.

“As many vendors and industry watchers call for a decrease in sales into the channel, our sell-through data is showing that 2009 performance will be flat rather than down over 2008."

Gartner had previously forecast a fall of around 4% this year.

Milanesi said she expected global handset sales volumes to grow 5-8% next year, but mostly boosted by the continuing growth on the grey market.

Gartner is the only large research firm publishing data on sales to consumers (sell through), while other research firms and brokerages usually track handset vendors’ sales to the operators and shops (sell in), which is easier to measure.

Gartner said it expected market leader Nokia to report strong sales volumes in the October-December quarter, but to continue to struggle in the smartphones market.

“Nokia should have strong end-of-year volumes as a result of good mid-tier products like the 5530 and 5230, but consumers seeking to upgrade to a high-end device may look elsewhere over the Christmas holiday sales," the research firm said.