Mobile Handset Market to Shrink in 2009, Says ISuppli

The global cell phone handset market will contract next year as consumers hang on to their handsets longer amid tough economic times, market-research company iSuppli said Wednesday.

The company revised down its outlook for the worldwide cell phone market and said it expects handset shipments next year to be 1.22 billion phones, which represents a 6 percent drop from its 2008 forecast of 1.29 billion units. The 2008 forecast is also lower than iSuppli's original prediction of 1.31 billion phones.

In revising down its figures iSuppli joins fellow market researcher Gartner and handset maker Nokia in expecting a weaker market in 2009.

From 2010 the market is expected to resume its growth but shipments aren't predicted to surpass the levels of this year until 2011, iSuppli said.

Of course such mid-term predictions are difficult to make at the best of times and in the current economic climate forecasting the state of the market next year is itself a challenge. Until a couple of months ago iSuppli had been forecasting nothing but steady growth for the market for at least the next several years but then the credit crisis hit, stock markets fell and consumers began thinking a little more carefully about their purchases.

In total iSuppli now expects 5.5 billion handsets to be shipped from 2009 to 2012, a drop of 753 million phones over the four-year period from its previous prediction.

The economic slowdown won't stop roughly 500 million consumers signing-up to mobile services for the first time in 2009 but much of that growth is expected to come from emerging markets where wages are lower and low-cost, entry-level handsets are likely to sell better than the latest feature-rich smartphone.

"The pricier feature-phone and smart-phone market segments are driven by existing subscribers who are upgrading their mobile devices to take advantage of new features and advanced data services. As the economic climate deteriorates, these customers are delaying their purchases," iSuppli said in a statement.

Gartner has noted that current users in the Asia Pacific region waited an average of eight months to buy a new handset in the third quarter, compared to four months previously.

Nokia, the world's largest cell-phone maker, last month revised down its projection for the global handset market in 2009 to 1.22 billion but said it sees smartphone sales holding up.

"The volume impact is primarily in the mass market but people still desire smartphones and they will continue to," said Rick Simonson, Nokia's chief financial officer in a conference call on Nov. 14. "It is a growing part of the market so where we see devices that really do add something different and add value, people still have a lot of demand for that."

Nokia is already cutting back and recently decided to lay off 600 staff and stop supplying phones to major Japanese carriers. During the third quarter of this year the company saw earnings fall 28 percent and revenue drop 5 percent while it lost market share.