Smartphones Bright Spot in Dim Handset Market, Says iSuppli


Smartphones remain a bright spot with global unit
growth as high as 11.1 percent in 2009, iSuppli Corp. predicts, although the outlook for the overall mobile handset market
continues to dim.

iSuppli's optimistic scenario predicts global smartphone unit shipments of 192.3 million units in 2009, up 11.1 percent
from 173.6 million in 2008. A more pessimistic outlook calls for growth
of only 6 percent this year, reaching 183.9 million units.

"For  the optimistic scenario to come to fruition,
wireless network operators must cut fees for data services and offer
aggressive subsidies to reduce consumer smart phone prices,"said Tina
Teng, senior analyst for wireless communications for iSuppli.
"Furthermore, wireless operators and handset brands have to sell
consumers on the value of smart phones to encourage customers to

However, if consumer confidence continues to erode, iSuppli's pessimistic forecast is likely to prevail, Teng warned.

iSuppli defines smartphones as mobiles handsets
that use high-level Operating Systems (OS), allowing them to expand
their functionality via sophisticated add-on applications, such as
personal information management programs. There presently is no
industry definition for the smartphone.  As the platform continues to
evolve, iSuppli will refine its definition of the smartphone as well.

According to the optimistic scenario, smartphones
will represent 17.4 percent of total mobile handset unit shipments in
2009. If the pessimistic scenario holds sway, smartphones will account
for only 16.6 percent of total mobile handsetsthis year.

Furthermore, the optimistic scenario foresees a
unit shipment Compound Annual Growth Rate (CAGR) of 21 percent from
2008 to 2013, while the pessimistic view predicts an 18.3 percent
growth rate.

"With 3G networks having become prevalent all over
the world, smartphones are no longer just for corporate users--they are
for consumers too," Teng said. "Consumers increasingly are demanding
data-intensive applications that require the kinds of high data speeds
supported by 3G networks."

With the rise of the smartphone market, battle lines are forming around operating systems used in these devices.

"The endorsement of certain operating systems by
various operators and handset brands is giving open Operating Systems
(OS) a push. With the power and influence of the operators in the
wireless supply chain, their support is putting high-level operating
systems under the spotlight."

High-level operating systems for smartphones
include Microsoft Corp.'s Windows Mobile, Symbian Foundation's OS,
Research in Motion's RIM OS, Apple Inc.'s Mac X OS, the Google/Open
Handset Appliance's Android, Palm's OS and other Linux-based operating

The enthusiasm for smartphone OS and software
development was demonstrated in February by multiple industry
announcements at the Mobile World Congress, including:

  1. Microsoft debuted Windows Mobile 6.5 running on handsets from HTC, LG and Orange.
  2. LG announced a plan to develop 50 Windows Mobile-based devices through the year 2012.
  3. Nokia, the world's No.-1 handset maker,
    announced its collaboration with Qualcomm on 3G smartphone products
    based on the Symbian OS.
  4. Huawei, one of the few promising Chinese mobile
    handset manufacturers, confirmed it will launch a smartphone in the
    third quarter based on the Google Android OS.
  5. Samsung, the globe's No.-2 handset manufacturer,
    confirmed the release of smartphones based on Android and LiMo, a
    Linux-based platform.
  6. No.-3 PC maker, Acer, also jumped into the smartphone bandwagon. 

Applications are Important

mobile OSes have emerged as critical components of service providers'
handset strategies. The OS ecosystem and the direction of each
application developer community determine the availability of
applications for network providers and subscribers. Because, the
operating system is transparent to the end user in most cases, such
applications are essential to attracting consumer interest.

"Beyond the friendliness of user interfaces, the
availability of a variety of applications is the key factor attracting
consumer interest to smartphone products," Teng said. "Thus, different
players at various segments of the supply-chain are starting to build
mini-ecosystems--including applications--in order to attract consumers
and gain their loyalty. Microsoft's launch of MyPhone, Nokia's Ovi and
the Android Marketplace all represent different approaches to building
such an ecosystem."

To retain subscribers and to reduce churn rates,
network operators must differentiate themselves through device and
service offerings, Teng added. Thus, additional proprietary
customization on the user interface is required. With the arrival of
open operating systems, increasing vertical integration among device
manufacturers and platform providers, the flourishing of widgets and
the growing phenomenon of social networking, network operators must
either share the total available market for service revenue with the
content providers and application developers, or include them as
partners in business development