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Entry-level smart phones to drive growth

Posted: 09 Aug 2010 ?? ?Print Version ?Bookmark and Share

Keywords:smart phone? mobile? cellular?

High-end smart phones may be getting the publicity but it is the entry-level smart phone segment that will drive the category's growth in the coming years, explains ABI Research. The firm projects smart phone penetration to rise from 200 million units this year to 400 million units in four years.

The firm's market research indicates that by 2015, the smart phone category will account for more than 30 percent of the mobile handset market. In early 2009, the category only held 15 percent.

Nokia is well positioned for the next round of growth, Burden said. It leads the smartphone market with sales of about 45 million handsets in the first half of 2010, twice its nearest competitor. The Finish giant which sold a total of 111 million cellphones in the second quarter can also leverage volume channels developed for its lower-end feature phones and handsets, he said.

Although Apple iPhones and Android handsets command much of the mindshare, Nokia still has the actual marketshare, Burden said. "Ignoring them would be a big mistake because they are often the first to market with new technologies," he said.

The Symbian mobile operating system, co-developed by Nokia and now made open source, jumped from use in 22.8 million handsets in the first three months of 2010 to 25.8 million in the second quarter. ABI attributed the growth to lower ASPs on the handsets.

But the big winner in the last quarter was the Android platform which saw sales rise from 5.5 million to 11.3 million units, matching second place Research in Motion, ABI said.

Apple declined slightly from 8.8 million to 8.4 million handsets sold in the quarter, in part due to the shift to its iOS 4. Apple's sales are expected to surge again now that the transition is over with the release of the iPhone 4.

"Antennagate did not slow down iOS4 at all," said ABI senior analyst Michael Morgan. "It almost seems they can do no wrong, even if they do wrong," he said.

Apple has a significant opportunity capturing new business users. However its limited distribution model and focus on high-margin products could shut the company out of the next big round of growth in low-end and emerging markets, Morgan said.

ABI declined to share forecasts of growth by software platform, in part because many wild cards are in the deck. One of the biggest ones, Microsoft's Windows Mobile 7, is expected to be released late this year, supported by new handsets from HTC.

Burden said he still has concerns about how well Microsoft's panel-based user interface will scale for users that have large contact lists. "It could get confusing, and Microsoft as big as it is will have a hard time keeping up with the pace of releases of the open source community," he said.

For its part, HTC was been riding the wave of Android growth to date, leaping from sales of 3.3 million to 5.4 million smartphones in the latest quarter. However the company's focus on high-end handsets may also prevent it from capturing the new growth at the low end, Morgan said.

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