In the ever-growing wireless industry, smartphones are becoming the defining product that drive sales for the original equipment manufacturers (OEM) of handsets, especially as entry-level and feature phones fall by the wayside. Smartphones in 2011 were believed to account for 32 percent of the 1.5 billion legal handsets sold last year; by 2015, that share will grow to 60 percent of the total market.
In fact, the future of the wireless handset industry will be shaped by trends in the smartphone segment, according to a new IHS iSuppli Mobile and Wireless Communications report from information and analysis provider IHS.
Already, successful OEMs such as Samsung, Apple and Motorola have responded quickly to this trend and are now offering product portfolios heavily dominated by smartphones. These OEMs produce handsets on the cusp of innovation with new hardware and software features and improved user inter- faces (UIs), while leveraging a growing ecosystem of application developers.
For OEMs not experiencing such success, however, all is not lost. In particular, three key areas offer many opportunities to less successful OEMs to achieve greater handset sales, including the sales potential of emerging regions, the appeal that low-end smartphones present to many developing areas of the world, and the assurance of much-faster wireless access speeds promised by the next-generation mobile standard known as 4G Long Term Evolution (LTE) for the developed world.
For population-heavy, emerging markets such as India and China, plenty of growth opportunities are available for handset OEMs given that wireless infrastructure here continues to mature, with the majority of the general population also beginning to adopt mobile phones. IHS iSuppli predicts that the number of mobile device subscribers in India alone will reach 1.2 billion by 2014, up from 234.0 million in 2007, corresponding to a compound annual growth rate (CAGR) of 19.4 percent over that seven-year period. And in Apple’s recent earnings report, China was identified as a key market, with the company attributing 12 percent of its revenue to that region alone. As such, these developing markets can offer great potential for struggling handset OEMs.
To do this, OEMs will have to focus on the development of low-end smartphones. While medium- to high-end smartphones already have saturated the premium market, the low-end, emerging market will provide the biggest room for growth. Given that the market will enjoy a remarkable CAGR of 81.1 percent from 2009 to 2015, IHS iSuppli expects the number of low-end smartphone shipments to grow from 4 million to 177 million during this six-year span. In comparison, the mid- to high-end segment is expected to have a much-smaller 15.1 percent CAGR.
IHS iSuppli defines low-end smartphones as devices that have limited capabilities and hardware feature sets while still supporting high-functioning operating systems like Android or Linux. In general these phones will address the prepaid and emerging market segments, and some feature sets could be traded off—depending on specific subscriber requirements—in order to meet targeted average sellling prices (ASP) for the units. The ASP for low-end smartphones was expected at less than $150 in 2011, with pricing anticipated to decline further to less than $100 by 2015.
Learn More > Smartphones and 4G, Changing the Mobile Industry