Smart phone shipments to grow, but overall mobile devices to decline

Bad economy will hurt phone sales in '09, and consumers don't see need for sophisticated devices, ABI says

Smart phones made up about 14% of all mobile devices shipped globally in 2008 and should increase to more than 17% of the total in 2009, according to new projections from ABI Research Inc. in New York.

However, the expected increase in smart phone shipments in 2009 will occur even as the overall total number of mobile devices shipped declined from 1.21 billion in 2008 to 1.17 in 2009, a drop of 2.5%, ABI analyst Kevin Burden said today.

The gloomy global economy will be one factor in the decline for all mobile device shipments in 2009, but another is how uncomfortable consumers have become with sophisticated new devices that they don't understand how to fully use, Burden said in an interview.

"We're seeing that people already have in their possession capable phones with color screens and more, and it may be that they already have the phone they are happy with," Burden said. "So the bad economy becomes an excuse not to get a more sophisticated phone. It's a question of simplicity and of getting a mobile phone with features beyond their capability to use."

One theme of several recent CTIA and International CES trade shows has been how new handhelds are often shipped with so many features and functions that users hardly ever use 10% of all the features, or even learn how to use them, Burden and other analysts have said.

So, if overall new mobile phones are so sophisticated that users might not want to buy a new one, why would smart phones like the iPhone be growing in popularity, with shipments expected to increase in 2009? According to Burden, smart phones started selling only recently, and their growth is "magnified" by the early adopter effect of one group of users wanting to try something new.

ABI said that about 116 million smart phones shipped globally in 2007, which mushroomed to 171 million in 2008 and should reach 203 million in 2009. That percentage increase from 2008 to 2009 is an increase of 18%, which Burden called "slow growth" in comparison to what should have happened were the economy better.

For all of 2008, the first half of mobile handset shipments was 14% higher than the first half of 2007, which dropped to 8% for the third quarter compared with the same quarter of 2007, ABI said. Then in the fourth quarter, shipments "crashed" by 10% compared to the final quarter of 2007. "Sheer fear sapped the confidence of consumers, enterprises and corporate users across the board," said Jake Saunders, an ABI analyst, in a statement.

ABI also released 2008 year-end numbers showing that Nokia Corp. had 38.6% of all 1.21 billion cell phone shipments globally, followed by Samsung Electronics at 16.2%, LG Electronics at 8.3%, Motorola at 8.3%, Sony Ericsson at 8%, Research In Motion Ltd. at 1.9%, Kyocera at 1.4%, Apple Inc. (shipping two versions of the iPhone) at 1.1%, HTC at 1.1%, Sharp at 1% and all others at 14%.

Burden called RIM and Apple the boldest movers in 2008 with new devices, and said they are likely "to continue their march to the consumer center stage." HTC also brought out the Android-based G1 and has significant contracts for 2009 that should play to its advantage, he added.

Motorola lost the most market share, dropping by 5% in the rankings, which was better than 2007 when Motorola dropped nearly 8% in the rankings.

"It will be a tough year for Motorola, but it needs to deliver handsets that draw back the once-faithful Motorola purchaser before it is truly too late," Burden added. "The challenge is that purchasers in 2009 will be very, very picky."

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