Fuel Prices Stall Phone Growth in Asia

Expanding telecom networks are driving the demand for mobile devices in rural areas of the Asia Pacific, but demand in mature markets such as Hong Kong, Singapore and Taiwan, is expected to slacken.

According to research house Gartner, mobile phone sales in the Asia-Pacific will continue to grow at a faster pace than other regions, where mobile phone sales are predicted to reach 472.5 million units in 2008, and 828.7 million by 2012.

Worldwide, Gartner says the mobile phone market is poised for double-digit growth in 2008 and 2009, with sales increasing 10.3 percent. However, Western Europe is projected to experience a decline in sales in 2008, down 1.5 percent from last year.

Rural User-Attractions

"High growth in markets such as India and China will drive overall volumes for Asia Pacific," said Anshul Gupta, principal research analyst, Gartner. "Other emerging markets such as Indonesia, Thailand, Malaysia and the Philippines will also continue to show growth. This is mainly driven by operators expanding their networks into rural areas.

"Indian operators are expanding aggressively into rural areas with very attractive voice plans bundled with low-cost phones to attract first-time users. We expect the basic phone segment to remain competitive in emerging markets with rising volumes year-over-year, though at a decreasing growth rate."

Slow Growth in Mature Markets

However, Gupta warned that handset demand in mature markets such as Singapore, Taiwan and Hong Kong will slow further in 2008 with the current economic chill, high inflation and rising fuel prices resulting in users deferring their purchase decisions. Gartner said this will also lead to a lengthening of contract periods in mature markets with South Korean operators already leading the way.

In emerging markets, sales of new devices will continue to be affected by factors such as multi-SIM and second-hand devices, which are significant, though both are expected to decline slowly over the forecast period. Fierce competition among operators, low cellular penetration and expansion into rural markets, will lead to a slow decline in multi-SIM and second-hand device growth rates.

"Tough spending trends in mature markets, competitive prices and value for money in emerging markets will influence overall sales in Asia Pacific in the near term," said Gupta. "However, over the forecast period this region will show impressive growth with rising replacement sales and users upgrading to higher-feature devices."

Mobile Tech Trends

Sales of general packet radio service (GPRS) and Global System for Mobile Communications (GSM)-based devices will decline over the forecast period whilst Enhanced Data Rates for Global Evolution (EDGE)-based devices will be in demand as replacement sales are beginning to rise in the region, with consumers upgrading to data-centric devices from pure voice-based devices.

Sales of wideband code division multiple access (WCDMA) devices are rising in both mature and emerging markets with consumers opting for more advanced features.

"Sales of high-speed downlink packet access (HSDPA) devices are showing strong growth with South Korea leading the market in this region. More than 60 percent of devices sold in South Korea are WCDMA/HSDPA based and we expect vendors to release cheaper WCDMA devices which will further drive up volumes in both mature and emerging markets," said Gupta.

"We believe that sales of basic phones will continue to rise until 2010, with strong growth continuing in emerging markets with many first time users buying basic phones. However, the wholesale revenues of basic phones will decline despite strong demands in emerging markets due to falling prices. Sales of enhanced phones will continue to increase during the forecast period while multimedia phones with high-resolution camera, music, Bluetooth, Wi-fi and embedded memory will also be in demand."

According to Gartner smartphone sales will account for approximately 35 percent of total sales by 2012, compared to seven percent in 2007. Both entry level smartphone and enhanced smartphone devices expected to see strong growth as the devices gain popularity in the mature and emerging markets, with users finding better value for money and increased usability.

Mobile Office Drives Sale

Increased adoption of the mobile office (e-mail, intranet and applications on mobile device) by corporates, and users having the first experience of Internet browsing on mobile devices, are likely to drive sales. Growth in the smartphone segment is also expected to be influenced positively by the launch of Apple's iPhone in the region.

This story, "Fuel Prices Stall Phone Growth in Asia" was originally published by Computerworld Hong Kong.

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