Smartphone adoption growing fast: WiFi phone sales expected to top $145 billion in 2010

Worldwide mobile phone revenue by network technology to 2010; a forecast from Infonetics.

July 30, 2007 Mobile phone penetration rates around the world are showing up some interesting trends - notably developing markets are selling more phones than ever but making less money as competition tightens. Developed markets are seeing a strong swing away from basic handsets toward more advanced Smartphones – a trend that will only be enhanced by the huge popularity of mass-market targeted handsets like the iPhone, which are starting to make these devices attractive to the consumer market as opposed to just business customers. Other interesting trends include the increasing number of dual-mode WiFi/Cellular phones that can seamlessly switch between local wireless internet connections and 2G cell phone networks to make optimal use of the economic efficiency of the former and the broad coverage of the latter.

Smartphones are defined as mobile phones that have features more reminiscent of a personal computer or PDA – including operating systems, calendar and email applications, GPS navigation systems, cameras, media players and the ability to install new applications. Popular examples have included Nokia’s 9210, the BlackBerry series, Samsung’s BlackJack and Apple’s recent cult icon, the iPhone.

The latest global data from market research firm Infonetics shows that while the mobile phone market is increasing penetration rates in developing markets, revenues are sliding due to increased competition and dropping prices. At the same time, in developed countries, 3G Smartphones are taking off with strong sales growth and increased revenues as consumers make more use of premium services and 3G network coverage expands.

“To date, smartphone purchasers have been largely business power-users, but the launch of Apple's iPhone and Samsung's BlackJack—media-playing smartphones that appeal to consumers—is giving the smartphone segment a boost, and could change the dynamics of the mobile phone market. Vendors will design more consumer-oriented smartphones, and cause fierce competition among incumbent players,” said Richard Webb, directing analyst for wireless at Infonetics Research.

Other mobile phone highlights from the report:

  • Worldwide revenue for mobile phones is expected to total $117.5 billion in 2010, an 18% drop from 2006
  • GSM phones made up 45% of worldwide mobile phone revenue in 2006, smartphones made up 18%, and the remainder was made up by CDMA, W-CDMA, and CDMA2000 phone sales
  • Worldwide revenue for the small but fast growing smartphone segment grew 10% in 1Q07 from 4Q06, driven by the wider availability of 3G, which unlocks the media application potential of smartphones beyond email
  • In 2006, 20% of total mobile phone revenue came from North America, 34% from EMEA, 36% from Asia Pacific, and 10% from CALA
  • The number of mobile subscribers grew 26% to 2.5 billion in 2006

Meanwhile, worldwide WiFi phone revenue, though up significantly in 2006, fell 8% to $5 billion in 1Q07, but is projected to post strong double-digit growth every year through 2010, when it will top $145 billion as WiFi is incorporated into a growing range of mobile phones.

Advantages of WiFi phones include the ability to use an available wireless internet connection to access very cheap call and data transfer rates, and in some cases seamlessly hand over a call to the mobile network if a user moves outside the WiFi reception area. This type of Fixed/Mobile Convergence (FMC) enables new carriers to get into markets whose mobile phone transmission spectrums are already crowded with 2G and 3G carriers.

Enterprises are ramping up adoption of WiFi phones, driven by increased use of wireless LANs and IP PBX technology, while consumers are adopting WiFi phones because of their increasing adoption of broadband connections with wireless and VoIP-enabled equipment on the premises. At the same time, operators are launching dual-mode FMC services, which will also drive adoption of WiFi phones.

Other WiFi phone highlights from the report:

  • Dual-mode WiFi/cellular phone sales are forecast to grow at a compound annual growth rate of 31% from 2006 to 2010, driven by healthy adoption in enterprise and consumer markets
  • Seamless handover FMC phones are expected to represent 35% of the dual-mode WiFi/cellular phone market by 2010, vs. 3% in 2006
  • Nokia leads in dual-mode WiFi/cellular phone revenue in 2006, ahead of Sony Ericsson and Motorola
  • SpectraLink (Polycom) leads in single-mode WiFi phone revenue market share, significantly ahead of Linksys and Cisco
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