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24th July 2003

US : As CDMA2000 1X and GPRS networks become ever-present worldwide, replacement handset sales drive market growth. These devices have greater silicon content and often include advanced features, yielding a higher average selling price. Second quarter earnings announcements from components manufacturers, including Texas Instruments and others, support this trend. However, the question needs to be asked: how long can this growth last?

"Sustainability is the question," states Edward Rerisi, Director of Research at technology market research firm ABI. "Margins for 1X and GPRS components will inevitably succumb to increased pricing pressure, so the real burden is placed on the addition of advanced features to continually increase value."

Recent uptake in advanced handsets, including those with color screens, cameras, Bluetooth, and high-speed application processors, are considered key to the future of the handset industry. While these features will drive revenue at the device- and chip-level, success still remains with mass-market adoption of these devices. The challenge lies in developing advanced devices that meet or exceed consumers' needs at sustainable price levels.

"The pitfall is if mass-market adoption is achieved only through rapid price declines," warns ABI's Rerisi. He points to Verizon's new camera phone, the LG VX6000, which already carries a retail price of about $150 after rebates, less than a month after its introduction; and Nokia's 3650, available for T-Mobile at zero cost through online retailers. "If these prices continue to erode in order to attract new consumers, it will undo all the benefits of upgrades," he concludes.

Further information on handsets is available through ABI's Wireless Handset Subscription Service. The service outlines the evolution of the handset to a multimedia and data-centric platform and the progression to the 2.5G and 3G networks. ABI provides a thorough examination of trends in the global market for wireless handsets and offers a realistic outlook on where the industry is headed. ABI's Handset Integrated Circuits Subscription Service covers the handset IC market by component, reviewing both regional and air-interface segments. Attention is paid to the continuing integration of functionality and their effects on ASPs, as well as revenue trends for the sector.