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Smartphone Growth Tops the Mobile Sector

When will the wireless sector reach total market saturation? Apparently not anytime soon. The worldwide mobile phone market continued solid double-digit growth in the second quarter (2Q08) as competition in high-end devices heated up.

According to IDC's market assessment, vendors shipped a total of 306.0 million units, an increase of 5.6 percent from the 289.7 million units shipped during the previous quarter and up 15.3 percent from the 265.4 million units shipped during 2Q07.

Total shipments for the quarter were in line with IDC's expectations, even as vendors cited economic challenges and changing demands within key regions.

"Since the start of the year, vendors have been wary of the potential decrease in demand for mobile phones," says Ramon T. Llamas, senior research analyst with IDC's Mobile Devices Technology and Trends Team.

"That has not stopped vendors from experimenting with and releasing a host of mid-range and high-end devices with GPS, touchscreen, and multimedia. This also goes for hotly contested emerging markets, where vendors are introducing phones that offer features in addition to voice telephony. Reception towards these devices has been warm, and as we head into the holiday quarter, demand for these and other devices will no doubt increase."

These design changes are escalating competition between devices in a new way. Converged mobile devices, also know to the industry as smartphones, have typically been the category of handsets incorporating higher-end features such as GPS and touchscreen. However, these features are quickly moving onto handsets further down the food chain -- feature phones.

"Smartphones are still seeing growth rates hovering around 40.0 percent year-over-year, while the rest of the industry is growing at roughly 10.0 percent," said Ryan Reith, senior research analyst with IDC's Mobile Phone Tracker.

"However, grouping the rest of the handsets into one category is doing the industry no justice. The rise of the feature phone has created a battle at the high-end of the market, with the main difference between smartphone and feature phone being the high-level operating system. We expect the competition at the high-end will help drive growth within the market and help move volume to higher-end devices."

In North America, mobile phone shipments experienced a healthy lift from last quarter, with vendors introducing a number of feature phones ahead of the much anticipated iPhone 3G. In many cases, these offered touchscreen, music, or GPS.

At the same time, the converged mobile device market grew faster than the overall mobile phone market and accounted for nearly a fifth of total mobile phone shipments.

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