Looking into 2006
Looking into 2006, Smyser predicted that EDGE and W-CDMA phone shipments will double, and that 850 million mobile handsets will be shipped for the year, a 4.6 increase compared to 2005. Despite projecting even higher production volumes for the remainder of the year, iSuppli maintains that revenue in the mobile phone market likely peaked in 2005 and that the handset industry is not likely to see the same financial returns it recorded last year until at least 2009.By 2009, the firm predicts that wireless phone manufacturers revenue will recover to that level of sales, but only after several years of smaller returns. While mobile handset production rose by 30 percent in 2003, 25.1 percent in 2004, and 13.6 percent in 2005, the research company said that unit manufacturing will grow by less than 5 percent this year, moving from 810 million handsets shipped in 2005, to a projected 850 million handsets shipped in 2006. The analyst said that a key factor in the decay of mobile handset revenues is the lowering of average selling prices for the devices. While this figure typically falls each year, based on decreasing component costs, he said that price reductions will speed up in 2006 based on a number of trends. Along with the markets demand for phone makers to lower the prices on high-end, third-generation models to spur adoption of new wireless services such as mobile video, the growing appetite for cheaper handsets in developing nations will also have a negative effect on revenues, he said. iSuppli said that handset pricing will fall to $129 per unit in 2006, a decrease of over 9 percent from the average cost of $142 in 2005. The research firm predicts that the pricing erosion will likely settle down in 2007, with the average price tag declining to $128 per device, a decrease of only 1 percent from 2006. Between 2008 and 2009, the company only expects a 1 percent decrease in phone pricing. By 2009, Smyser believes that there will be sufficient demand for more expensive third-generation phones as replacements for todays common handsets to drive market revenues above the 2005 results. Check out eWEEK.coms for the latest news, reviews and analysis on mobile and wireless computing.
According to iSupplis estimates, worldwide factory revenue from the production of mobile phones will fall to $109.7 billion in 2006, a decrease of 4.7 percent from the $115.1 billion in revenues recorded in 2005, the industrys biggest year ever, according to iSuppli.