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Friday, November 14, 2008

Latest Outlook on New Mobile Phone Sales

Revenues from mobile phone sales are expected to grow at 6.8 percent CAGR between 2007 and 2013, and should exceed $200 billion by the end of 2013, according to the latest study by Informa Telecoms & Media.

Emerging markets, including Brazil, Russia, India, and China (BRIC) and Africa, will make up the majority global handset market value, with 60 percent share in 2013. Growth disparities between developed and emerging markets will become apparent within the next five years.

Growth will not exceed 2 percent CAGR in developed markets according to the report, handset market value growth rates are slowing significantly in developed markets and, if the current economic slowdown persists, could even turn negative after 2009.

Informa does not expect revenue growth from mobile phone sales to exceed 2 percent CAGR in Western Europe, 1 percent in North America, and less than 0.5 percent in Japan between 2010 and 2013.

In these regions, the smartphone market will represent the major growth area. Revenues from this type of phone will represent more than 55 percent of total handset market value in North America, Western Europe, and Japan. However, this growth will only help offset the sharp decline of non-smartphone market value.

Handset market volume sales in these regions are reaching saturation, leading to increasing competition between handset OEMs. The price war will only intensify at a time when new entrants such as Apple and Google are increasing their pressure on competitors to reduce their prices mainly for feature phones and smartphones.

"With the ongoing fall of feature phone and smartphone ASPs, several leading handset vendors are now looking for new ways of controlling handset manufacturing costs in order to maintain margins," said Malik Saadi, Principal Analyst at Informa Telecoms & Media.

With this in mind, vendors have already shifted the majority of production plants into low labor cost regions such as China, Taiwan, India, Vietnam and Eastern Europe and now they have to play the only remaining card: lowering the bill they pay for chipsets and terminal software.

Device vendors have traditionally relied on customized chipsets for powering their products. Now that modem chips are becoming a commodity, and vendors are adopting off-the-shelf solutions, price competition is expected to increase significantly, requiring suppliers to generate significant economies of scale.

The mobile handsets industry is also turning its interest to open-source, a community based approach, which promises vendors a reduction in or the elimination of royalties related to terminal software and will also help them lower the cost of maintaining commodity software because, under open source rules, this cost is shared among all members of the community rather than being borne by a single vendor.

The value of the global smartphone market will grow from almost $39 billion in 2007 to more than $95 billion, 47 percent of the total handset market value in 2013.