"3-High" Functionality of Cellphones to Drive Market Growth in 2009: TRi

Topology Research Institute (TRi), the largest private market researcher and consultancy in Taiwan, predicts a certain downturn in the growth of cellphone sales in the first-half of 2009, with the market growth expected to slow to sub-double-digit levels.

TRi suggests cellphone and parts suppliers in Taiwan pay more attention to the smartphone sector.

One ray of optimism lies in the "three highs" functionality of cellphones, including high dependence, high integration, and high-speed Internet accessibility, with such features not only helping potential buyers of cellphones to defy any psychological barriers blocking purchase willingness amid the global economic fallout, TRi says, but also becoming the few warm underlying flows to churn chilly currents ahead.

High Dependence

For many in this generation of global e-connectedness, TRi points out, having a cellphone is perhaps even more critical than packing one`s keys, wallets or purses-becoming virtually an addiction in an age where massive migration of laborers and social uncertainties often exasperate loneliness, with cellphones being an electronic security blanket more than a communication device; not to mention that mobile phones are often the only available telephone in areas with sparse telecom infrastructure: The penetration of cellphones exceeds 51% in developing nations and 94% in developed markets.

TRi also says that cellphones differ from other consumer electronics in the high degree of dependence on the former: where high-dependence translates into high levels of personalization, meaning one user is often driven to own at least one or few mobile phones that are personalized with unique IDs and settings. Such dependence differs from ownership of typical home appliances where users generally do not mind sharing a toaster, iron with family and friends. TRi, however, does not psycho-analyze such market trends. For example, huge numbers of multi-phone owners could rely on such easily portable devices as affordable toys, a distraction that offers personal interaction that seems to be important for innumerable users whose lives are otherwise devoid of "substance;" while cellphone ownership, especially in emerging markets, is very likely a truly-affordable status symbol.

The handset is also, somewhat unsurprisingly, the last-abandoned electronic product, with all telecom providers locking subscribers with "deals that literally cannot be refused": users generally can buy costly cellphones at irresistible prices when they agree to sign two-year contracts in highly competitive markets, a strategy that is an excellent buffer in this global economic downturn, TRi says.

Citing a mainland Chinese example, TRi says that new cellphone subscribers increased about 8.6 million from January to August this year, compared with 7.75 million in the second half of 2007, despite the serious economic impact from the snow storms in February and global financial storm that began in mid-2008. The market researcher says that the cellphone market in China clearly seems unfazed amid the overall global downturn.

"One Price Buys Multi-functionality"

The market consultancy also attributes the upbeat market outlook to the "one price buys multi-functionality" characteristic of cellphones.

TRi says that an economic recession compromises spending willingness that drives consumers to delete various tech products from shopping lists. Multifunctional cell phones, in effect are many tech gadgets in one as defined by TRi, bear increasingly appealing marketability for being simultaneously digital camera, audio/video players, game console, portable navigation device (PND), PDA, or even a micro-computer.

Backing such observations, TRi cites the market changes in India: In 2008, sales of phones with built-in digital camera are rising in India, adding that in 2009 the "one price buys multi-functionality" feature of cellphones will help to significantly drive replacement purchases in that huge market and other developing nations.

While the resolution of camera-integrated cellphones continues to be upgraded, TRi forecasts that more than one billion music-enabled handsets will be shipped in 2009, for a penetration of 69.5%.

The market consultancy also says that smartphones with the highest degree of integration will be a promising product category in 2009, with such product expected to retain 30%-plus shipment growths.

New Business Model

Another important feature, according to TRi, that will help to further drive the development of cellphone market in 2009 is High Speed Downlink Packet Access (HSDPA). Such high-speed wireless data- transmission service has been gaining increasing popularity in some mature markets, as telecom carriers actively promote such value-added service by providing flat-rate incentives and bundled handheld devices such as Apple`s iPhone and HTC Diamond smartphones.

In the emerging business arena, TRi points out a potentially practical service to be offered by telecom carriers, who can tap into detailed subscriber data to offer personalized value-added services. One excellent example is LBS (location-based services) or a voice-activated Q&A service: a user merely asks routine questions as "where is the nearest diner" on-the-road to get convenient answers.

TRi also says that advancing 3.5G mobile service and software architectures have also been speeding the development of multimedia value-added services, with Microsoft, Apple, Google, Sony, Nokia, HTC, and Motorola all likely taking part.

Alongside the growing sophistication of the above-mentioned mobile phone functions are new challenges placed upon OE parts suppliers, who are required to develop components for lighter, thinner handsets, with newcomers boasting price, technology advantages expected to replace older, less-competitive players.

TRi suggests handset and parts makers in Taiwan focus on tapping the business potential of smartphones in 2009. The consultancy forecasts a shipment decrease of six million code division multiple access (CDMA) 2G and 2.5G handsets in 2009, as well as an increase of 48 million GSM/FPRS/EDGE models and 60 million 3G, 3.5G (WCDMA, CDMA 2000) models. Overall the research firm says cellphone shipment in 2009 is expected to grow 7.4%, or about 100 million units to reach 1.45 billion units.