Camera-phone Market Set To Double

Europe : According to a report released today by ARC Group, by the end of 2003 more than 55 million consumers worldwide will own camera-phone handsets, more than doubling from the 25 million mobile units sold in 2002.

For the UK and many other mature markets worldwide, the growth will come from existing mobile phone users as they are encouraged by handset manufacturers and network operators to replace their handsets with more feature-rich models, a turnaround from a few years ago when the emphasis was on the first-time buyer.

"This year we have seen a massive growth in camera-enabled phones, with 15 per cent of handsets worldwide featuring built-in cameras or designated camera accessories," commented David McQueen, ARC Group's Senior Consultant and author of the Future Mobile Handsets 2003-2008 report. "Tempted by innovative design features such as rotational cameras and swivel screens, along with the advent of multimedia messaging, colour displays and polyphonic ring tones, we'll see many consumers upgrading their mobile phones this Christmas."

The ARC Group study into the future of mobile handsets predicts that by 2005, 130 million handsets with camera capability will be shipped globally, and with the additional boost of 3G roll out, this figure is expected to increase to 210 million by 2008. "Globally, the Asia Pacific region will continue to lead the way, but Europe is expected to improve its market share through the continued take-up of mobile messaging services and with operators promoting attractive services such as Vodafone's Live! service," McQueen explained.

ARC Group predicts the entire mobile handset market to grow by 10.3 per cent with consumers buying 444 million mobiles by the end of 2003, up from 402 million in 2002. This trend is set to continue for the next five years, with handset sales forecast to reach 689 million by 2008, in line with subscriber growth. "Despite continued delays to 2.5G and 3G network roll out in the early part of 2002, there was distinct expansion by the end of the year, and the market in 2003 has since staged a comeback," commented McQueen.

While this is encouraging news for the mobile industry, the Future Mobile Handsets report advises that as the market evolves, major challenges will still continue for handset manufacturers. "The challenge for the mobile handset market is to find the right balance between device costs, performance and style. Handset manufacturers must be able to differentiate themselves from the competition by carefully understanding the consumer groups they are targeting and identifying key markets for future growth. Consequently branding and a heightened end user focus will become crucial for new entrants and the major players," McQueen concludes.

ARC Group's Future Mobile Handsets 2003-2008 report findings include:

The major players: 2002 saw a noticeable change in the market shares of the major handset vendors, although the top two, Nokia and Motorola, remain the same. Most notable rises are Samsung which has increased its worldwide share to around 12 per cent, and LG, which is doing well in the CDMA market. Siemens also saw its share grow in 2002, however market share for Sony Ericsson and Alcatel has slipped. For the first half of 2003, the top four remained unchanged, although LG was hampered by SARs and Sony Ericsson staged a comeback to push up its market share.

Europe Vs Asia/Pacific: In 2002, the Asia/Pacific region was the world's largest handset market, growing 16.4% to 174 million. Growth in the region is expected to increase dramatically over the next five years since penetration remains low. In contrast, Europe lost sales last year owing to the stalling of the Western European market, being ever-reliant on the replacement market, and growth is expected to be slow up to 2008.

GSM Vs CDMA: The GSM family currently holds around two-thirds of the handset sales market, and this is forecast to increase to 77 per cent by 2008 due in part to the migration of TDMA operators' subscribers to GSM networks. CDMA share is to rise from current levels of 16 per cent to 17.5 per cent by 2008, in line with subscriber growth forecasts for the technology. However these forecasts across technologies could be altered following the announcement this year by Samsung and Qualcomm who are partnering to develop the world's first multi-mode, multi-band handset enabling GSM and CDMA network roaming with one subscription.

Improving time to market through outsourcing: A major challenge for vendors is avoiding delivery delays, which have in the past plagued the industry. Outsourcing is a growing trend in the marketplace, currently 20 per cent of the market, as it helps cut costs of production and provides manufacturing flexibility. This pressure will undoubtedly continue with the pressures put on traditional vendors to quickly bring products to market and the advance of operator-branded handsets. Consequently there has been a marked swing in manufacturing to China and Taiwan in a chase for cost-cutting and speed of delivery.

Videophones sales worldwide: Leading the videophone market is Japan where it is estimated that 40 per cent of camera-phones sold in the second half of 2003 will have video recording capabilities. However, the deployment of mobile video in both Europe and America will not rise until at least 2004/2005 with the launch of WCDMA and cdma2000 3x networks. Widespread availability of such services will not occur much before 2006 when large quantities of video-capable handsets are expected to be available.

Beyond 3G: The market is starting to see development of next generation networks beyond 3G, which will enable a single mobile handset to access a growing array of mixed mobile networks, including wireless LAN. However, ARC Group predicts that the success of Wi-Fi hotspots could present a real threat to wireless carriers who are currently setting up high-speed wireless networks.