Global mobile phones sales dipped below 400 million units in 2001, research group Gartner Dataquest reported.
Overall sales to consumers declined by 3.2 per cent to 399.6 million mobile phones in the full year, a marked difference from the 60-per cent average growth rate between 1996 and 2000.
It is the first decline in the history of the industry, which has recently seen a reshuffle among second-tier manufacturers.
Sales were hurt by saturated markets in Europe, the removal of subsidies by telecoms operators, a burgeoning second-hand market in developing countries and unlisted imports from overstocked distributors wanting to get rid of inventories that were built up in 2000, said senior Gartner analyst Mr Bryan Prohm.
Moreover, handset makers and operators failed to introduce new features that could convince consumers to replace their old handset with a new, more expensive one. The slowing economy also hurt consumer spending in general.
Consumers also shunned General Packet Radio Service - seen as a stepping stone to third-generation (3G) services. Network operators failed to convince end-users of the benefits of this new network, which offers slightly faster access to mobile Internet services, Gartner said.
Market leader Nokia recovered all ground it had lost earlier in the year. It grabbed 36.9 per cent of the market in the fourth quarter, up from 33.4 in the third quarter as a new line-up of models caught on with the Christmas shopping crowds.
The company ended the year with a 35 per cent market share, up from 30.6 per cent in 2000.
Motorola, despite a fourth-quarter dip, halted its decline and defended its number-two slot with a full-year market share of 14.8 per cent, versus 14.6 per cent in 2000.