Overall handset growth to slow "dramatically" - report

The rate of overall worldwide mobile handset growth will slow dramatically beginning next year as saturation in developed markets starts to balance out the booming growth in emerging regions.

So says Telecoms.com’s parent, Informa Telecoms & Media in its latest report “Future Mobile Handsets”.

Since the slump in the worldwide handset market at the turn of the century, it has experienced double-digit growth year on year. But according to the analyst firm, that vigorous growth is due to slow down from 2007 onwards. It suggests growth in the market will fall from 15.7% in 2006 to 3% by 2011.

In order to cope with the dramatic drop, handset manufacturers will now have to focus on improving their designs to prompt upgrades, according to Informa. Even with upgrade enticers such as digital cameras, built-in music capability and mobile TV, manufacturers are not expected to maintain the sort of growth they have enjoyed over the past few years. “They’re really going to struggle to sell as many handsets and sustain the same levels of profitability,” said Dave McQueen, principal analyst at Informa and author of the report.

McQueen added: “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.”

The analyst group also suggests a “sustained” period of mergers and acquisitions as the market contracts but predicts that powerhouse brands like Nokia and Motorola will continue to lead the pack and are tipped to play an increasingly dominant role in the fast-emerging Chinese market.

The report acknowledges the important role technology has played in increasing market penetration in developed markets and predicts more of the same in the future. According to the research group music and mobile TV will be the “next key battlegrounds” for manufacturers trying to maintain healthy growth.

According to Informa’s findings, 9.6 per cent (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’s research predicts the number of handsets sold with music capabilities will rise from 69.8 million in 2005 to 126.1 million in 2006 – an 80 per cent increase. But it is camera capability the research firm sees as the most important add-on for mobiles running up to 2011. At the end of that five year span Informa believes around 55 per cent of all mobiles will be music capable, compared with 81 per cent which will be camera-ready. Informa sees cameraphones as a major growth area and argues that manufacturers have, thus far, failed to capitalise on their potential.

McQueen said: “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… if many of the newer services are to reach critical mass.”