The mobile phone industry had a record first quarter with 180.6 million units sold worldwide.
The sales record marked a 17 percent increase over the previous record of 153.7 million units set in Q1 2004, according to research firm Gartner.
"More phones are being sold, but profit margins are shrinking," said Ben Wood, research vice president for mobile terminals research at Gartner.
"This is because consumers in emerging markets want cheap handsets, and competition in more developed markets keeps prices low."
Wood said that emerging markets in Eastern Europe, Middle East and Africa and Latin America bolstered global sales, while replacement sales in mature markets such as Western Europe and North America ensured buoyant performance.
Nokia held the number one sales position, increasing its market share to 30.4 percent up from 28.8 percent in 1Q 2004.
Motorola came in second with 16.8 percent market share. Samsung, LG and Siemens rounded out the top five with 13.3 percent, 6.2 percent and 5.5 percent respectively.
Gartner expects that worldwide mobile phone sales to increase 13 percent in 2005 to 750 million units.