The rate of overall worldwide handset growth will slow dramatically in 2007, the latest report from Informa Telecoms & Media has claimed.
With camera phones now mainstream, the next key battlegrounds for vendors will be music and mobile TV, the report found.
Informa said that saturation in developed markets will start to balance out the booming growth in emerging regions. Informa predicted the number of handsets shipped will still rise from 814.4 million at the end of 2005 to 1.255 billion by 2011.
“Handset manufacturers have enjoyed a fantastic time of it in recent years but they’re really going to struggle to sell as many handsets and sustain the same levels of profitability,” commented Dave McQueen, principal analyst at Informa Telecoms & Media.
“The growth in developing markets such as India, China and Latin America is impressive but we are not seeing the same levels of phone take-up per capita. With handset sales in saturated developed markets being much slower and reliant on replacement of old models, the net effect is a major slowdown in overall rate of growth from next year,” McQueen said.
Since the slump in the worldwide handset market at the turn of the century, it has experienced double-digit growth year on year. Informa’s predictions, however, reveal this buoyant growth will slow from 2007 onwards with annual growth rates eventually declining from 15.7pc in 2006 to 3pc in 2011.
The emerging economies are experiencing large increases in subscriber numbers driven by healthier economies and the availability of low-cost, entry-level handsets.
Yet in more developed regions with high penetration rates, growth is largely restricted to active replacement of technologically advanced handsets, with capabilities including digital cameras, MP3 playback, video and broadcast TV, and will not sustain such major increases.
Consolidation among handset manufacturers has been prevalent in recent times and Informa predicted a sustained period of mergers and acquisitions. Intense competition and a shortening handset model lifespan are forcing many vendors and operators to drastically change their business models or risk dropping out of the market.
Many, especially in the over-serviced Chinese market, will be swallowed up by dominant leading brands such as Nokia and Motorola who are pulling away from the rest. Pressure will also come as a result of the very low profit margins gained by low-cost handsets sold in some developing territories.
In developed markets, functionality will become ever-more important for handset manufacturers as they attempt to maintain sales in spite of high levels of penetration.
The onset of multimedia messaging, in tandem with colour screens, has now pushed the mass market arrival of camera phones in most markets worldwide, followed closely by gaming, video download and video streaming. The next key battlegrounds for vendors are music and mobile TV, said Informa.
According to Informa’s findings, 9.6pc (120.12 million) of all handsets sold will be equipped with broadcast mobile TV capability in 2011. The strongholds of China and South Korea will dominate this sector over the coming years but by 2011 the US, China and Europe will have also grown to be key.
Informa predicted the number of handsets sold with music capabilities will rise from 69.8 million in 2005 to 126.1 million in 2006 — an 80pc increase. 2011 is predicted to see 55pc of all handsets sold enabled with music playback functionality.
Camera phones, one of the most successful features of next-generation handsets, will represent 81pc of total handset market sales by 2011.
Informa said this is still a major growth area, especially as operators have so far failed to capitalise on increasing revenues from camera phones.
Operators have been focusing the technology on person-to-person messaging rather than activities normally associated with digital cameras, such as uploading pictures onto PCs and either printing them out or sharing them via the internet.
Improved software enabling users to upload images straight onto a personal mobile web blog site will help drive the market.
McQueen explained: “Whilst the technology has improved significantly to handle many of these added features, future mobile handsets will need to incorporate more powerful processors, greater memory components, enhanced displays and increased battery longevity to cope effectively.
“The industry must face up to challenges ranging from consumer cynicism and pricing to network interoperability, compatibility and roaming issues if many of the newer services are to reach critical mass,” said McQueen.
By John Kennedy