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Slowdown ahead for handset market

Posted: 29 Dec 2008     Print Version  Bookmark and Share

Keywords:mobile phone  shipment  consumer behaviour  smarphones 

The impact of the global economic turmoil will spread to the mobile phone market resulting in a downturn in shipments in 2009.

According to market research firm IDC, total mobile phone volumes will be 1.9% lower in 2009 than 2008 levels, the first downturn in annual shipment volumes since 2001 when shipments declined 2.3%.

Over the past several years, the handset market has enjoyed double-digit annual growth due to an increased emphasis on emerging markets. However, emerging market growth has been steadily slowing as these markets mature. IDC now expects worldwide growth to be just 7.1% in 2008 before slipping into negative growth in 2009.

In recent months, a number of major industry players – including component suppliers, handset makers, and operators – have announced their concerns about handset volumes in 2009. Most have indicated that they expect a year-over-year decrease due to the flagging global economy.

"Nokia's announcement was the first sign of troubles to come," said Ryan Reith, senior analyst with IDC's Mobile Phone Tracker. "However, the real concerns set in with announcements from the chipset vendors who supply the industry. Qualcomm, Texas Instruments, and MediaTek are among some of the suppliers announcing reductions in manufacturing for the upcoming year. There is a lot of uncertainty about how the markets will fare and inventory levels will be more of a focus point then ever before."

The economic crunch has also affected consumer behaviour, particularly consumers' plans to purchase new devices. With less disposable income available and other expenses competing for attention, consumers may choose to hold on to their current devices rather than replace or upgrade them at the next possible opportunity, usually when a service contract expires. As long as the device functions properly, consumers may put off the replacement decision until more funds are available. This shift in demand will reduce the need for devices from handset vendors, much in the same way that the shift in supply will reduce the availability of devices from handset vendors.

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