Smartphones to rule declining handset market

Changing consumer behaviors brought about by the ongoing global economic downturn is stimulating a renewed focus on smartphones

Changing consumer behaviors brought about by the ongoing global economic downturn is stimulating a renewed focus on smartphones, which analysts say would rule the declining handset market.

Adam Leach, devices principal analyst of global advisory and consulting firm Ovum, described smartphones as "the silver lining of the declining handset market" and came out with a forecast that smartphone shipments will reach 406.7 million by 2014.

Leach pointed out that in 2008, for the first time in the mobile industry's history, consumer demand for third-party applications started driving both handset sales and revenues for developers and original equipment manufacturers (OEMs). An example of this was Apple's success with the App Store that has prompted other players to focus on devices that can enable third-party developers to easily bring applications and services to mobile phones.

"The growth in smartphones is a result of changing consumer behavior and a push by OEMs and mobile operators to develop new revenues through applications and services based on smartphone platforms," Leach said.

He added the collapse of the market for mid-tier handsets in 2009 is polarizing the handset market, with vendors and mobile operators focusing on two types of handset -- the low-end and high-end segments. The end result is a quickening of the replacement of 2G in favor of high-end 3G handsets, and greater volumes of smartphones.

Ovum announced they expect such factors to grow smartphone shipments by 18.7% between 2008 and 2009 despite the overall decline during the same period in the total mobile phone market. This growth will continue at a compound annual growth rate (CAGR) of 19.5% until 2014, at which point smartphones will account for 29% of the total global handset market.

Leach said such growth in smartphone shipments is against the backdrop of a global decline in volumes of 9.1% compared to global shipments achieved in 2008.

"The decline has been a result of the global economic downturn which has impacted all geographic regions and even those in emerging markets," he said.

In Asia-Pacific (AP), smartphone shipments are forecast at 52 million in 2009, growing to 142 million in 2014. Ovum said AP's smartphone shipments will account for 30% of the world shipments in 2009.

SYMBIAN VS. ANDROID

And as OEMs and mobile operators focus on improving applications and services based on the smartphone platforms, a tight battle between two platforms -- the Symbian and Google Android -- is seen to explode.

"While Symbian remains as market leader, Google Android is the rising star," Leach said, noting Symbian's top position was a result of Nokia's championing of the platform and its widespread use within the player's device portfolio.

In 2008 Symbian OS represented 58% of the smartphone market.

"Following Nokia's acquisition of Symbian and creation of the Symbian Foundation, Nokia will continue to be an active supporter and drive the platform deeper into its portfolio," Leach said.

Ovum expects Symbian OS market share will drop to 43% by 2014 due to rapid adoption of new platforms such as Android, although it will maintain its market leadership.

"From a standing start in 2008, adoption of Android will be rapid and we expect Android shipments to reach 72 million units by 2014, representing 18% of the market and overtaking shipments of Windows Mobile," Leach said. "Android shipments will be driven by adoption by all tier-one OEMs (except Nokia) and an active developer community."

Ovum defines a smartphone based on its software platform and considers the following to be smartphone platforms: the Symbian OS, Windows Mobile, Android, OS X, BlackBerry OS, Palm OS, Web OS and LiMo.

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