Smartphone Market Set To Grow Say Analysts

The midrange mobile handset market is being squeezed, according to a new report from Juniper Research, which found the strongest growth to be among high-end smartphones and low-cost handsets for emerging markets.

These two bookends of the market are expected to account for nearly 79 percent of all new mobile phones by 2014—or just over 1 billion units total—found report author Andrew Kitson.

“Low-cost handset shipments will number more than 700 million in 2014, up by 31 percent from levels seen in 2008, albeit slightly down from a peak of 716 million in 2012, as some users begin to upgrade to costlier devices,” Kitson said in a statement.

“At the same time, smartphone shipment volumes will grow continuously across the forecast period, reaching almost 360 million by the end of the period. We therefore expect that midrange device sales volumes will fall by more than 41 percent over the period.”

Kitson told eWEEK that there will be some demand for midrange handsets, and Samsung and LG Electronics continue to see demand for these products in Latin America, Asia and parts of Europe. However, Apple has changed the game for everyone.

“The iPhone has been a game-changer in so many ways, and those—such as Motorola and Sony Ericsson—[that don’t] adapt may not survive,” Kitson told eWEEK in an e-mail. He went on to explain that consumers are willing to pay for more features.

“If a phone has wireless broadband, MP3/MP4 media players, touch-screen interfaces, etc., it’s likely to do well. Hence, there have been so many iPhone emulators in recent months.”

The iPhone and the BlackBerry’s growing acceptance among consumers have dealt blows to Motorola, which failed to innovate after its success with the ROKR and RAZR midtier lines, Kitson wrote.

“Moto’s phones—which predominantly use operating systems based on the aging Linux and Windows Mobile platforms—look increasingly ‘last century’ to customers won over by the simplicity and elegance of design of the iPhone and BlackBerry,” Kitson continued. Moto is now “pinning its hopes on Android,” he said, but it may be too late, since Nokia, RIM and Samsung are already “jumping on the apps bandwagon.”

The Juniper report details that India, the primary emerging market, accounted for 23 percent of low-cost handset sales in 2008, and by 2013 is expected to account for 22 percent of sales. Emerging markets are also expected to be boosted by services such as Nokia’s Life Tools, which offers localized, very targeted information, such as market prices for farmers.

In May, Nokia introduced the 2730 Classic, which at approximately $108 was its least-expensive 3G phone to date. Like the $75, Internet-ready 2720 Fold phone, the 2740 offers access to Life Tools. Kitson suggests this route could also be a good one for Motorola.

“I’m also worried that Motorola—now saddled with massive debts—may focus too much on smartphones and the higher end of the market to save its business,” Kitson told eWEEK.

“Our low-cost handsets report finds that the vast majority (75 to 80 percent) of new mobile subscribers will come from emerging markets over the next five years. They won’t want or have need of expensive phones. Quite the opposite. So, if Motorola and Sony Ericsson don’t cater to that market, they risk being marginalized.”