Smartphone competition to bite this year

(SUPPLIED)

Booming demand for new, cheaper smartphones helped fuel a recovery in the overall handset market late last year, but rivalry for a piece of this lucrative business will turn fierce in 2010 as many new vendors enter the market.

"The smartphone market will become ultra-competitive in 2010," said analyst Neil Mawston from research firm Strategy Analytics (SA).

"The smartphone wars will be good news for consumers, but the fierce competition will inevitably place downward pressure on vendors' pricing and margins."

South Korean companies Samsung Electronics and LG Electronics, the world's No2 and No3 handset vendors, respectively, are planning to sharply increase their very low smartphone sales, while new players such as Huawei and Dell are strengthening their offerings.

"An influx of new players, an oversupply of devices and aggressive pricing will strain profit margins," said CCS Insight analyst Geoff Blaber.

HTC, the world's No4 smartphone brand, said last week it will be one of the first to suffer from increasing competition when it forecast a decline in gross profit margin in the first quarter.

"Those with a tightly integrated device and service offering – like Apple and RIM – will be the winners in 2010," said Blaber.

Strategy Analytics said yesterday the smartphone market grew 30 per cent year-on-year in the December quarter to 53 million phones, the highest ever.

The growth was part of the overall market recovery in October-December thanks to an improving global economic picture. SA estimated the mobile phone market grew 10 per cent from a year before, halting four straight quarters of contraction.

Finland's Nokia, which continues to sell more smartphones than its two closest rivals – RIM and Apple – combined, shipped 20.8 million smartphones in the December quarter, up 38 per cent from a year ago.

An improving position in the smartphone market – helped by messaging phones such as the E71 and E72 – lifted Nokia's sales and profits in the December quarter above analysts forecasts, sending its shares soaring last week.

Nokia's average smartphone prices dipped to €186 (Dh950) from €190 in the third quarter. Blackberry maker RIM shipped 10.7 million smartphones in the December quarter, remaining comfortably ahead of Apple's 8.7 million iPhones.

 

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