Will the iPhone Introduce Change?

ABI Research forecasts that the smartphone market segment will grow from 218 million units in 2007 to 426 million units in 2012. Now that there is a little distance from the iPhone launch, it is time to ask: “Will the iPhone change the smartphone market?”

According to Stuart Carlaw, wireless research director at ABI Research, the answer is a qualified “Yes.”

“The iPhone will not revolutionize the smartphone market,” he said, “but it is a significant evolutionary step forward. As was pointed out once its specifications were made public, the iPhone is not cutting-edge telecommunications. Where it is radical — in its user-interface and functionality — it will certainly change forever the way handset manufacturers think about their design philosophies. And from the commercial point of view, it is significant in the way it assembles its offerings in a completely integrated, brand-heavy package.”

Certain technologies critical to the interface are likely to receive greater attention as a result of the iPhone, particularly touch-screens, which will become more sensitive, and accelerometers, which the iPhone uses to orient its displays and active/deactivate controls depending on how the handset is held.

Carlaw adds that, “The iPhone’s effect on the market will be similar to that of Motorola’s RAZR. It will spawn a number of look-and-feel-alikes and will be seen as a benchmark for future design. One thing for certain is that the product is not intended to be an enterprise device, so its impact will be most keenly felt in the high-tier feature phone market and in the emerging prosumer market segment.

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Shipments Up, Profits Weak

Worldwide sales of semiconductors grew to $121 billion in the first half of 2007, an increase of two percent from the $118.4 billion reported for the first half of 2006, according to the Semiconductor Industry Association (SIA). Second-quarter sales of $59.9 billion declined by two percent from the $61.1 billion reported in the first quarter of 2007. Sales in June 2007 amounted to $20 billion, a decline of 1.7 percent from the $20.3 billion reported in May.

“Continuing rapid price attrition in several important market segments held growth in total semiconductor sales to just over two percent in the first half of 2007 despite increases in total unit shipments of almost seven percent,” said SIA President George Scalise.

“Sales of personal computers were strong in the second quarter, with unit growth now projected at more than 10 percent for 2007,” Scalise continued. “PC buyers are continuing to reap the benefits of declining prices for microprocessors and DRAMs, which enable PC manufacturers to offer very powerful systems at attractive prices. The average price of a desktop system has fallen to around $700, while the memory content of these machines has increased by approximately 50 percent over last year.”

ME Mobile Markets Rewarding

The Middle Eastern mobile market presents greater revenue opportunities than markets in Europe when taking into account its size and spending power, according to a new report, “The Middle Eastern Mobile Market: Trends and Forecasts 2007-12,” published by Analysys. In 2006, total mobile revenue per capita in the Middle East demonstrated a trend above that of European markets when comparing markets in the two regions with similar levels of average disposable income. In a Middle Eastern market, total mobile revenues would be expected to be 20 percent higher than an equivalent European market.

“While there is increasing liberalization of the mobile market across the region, mobile operators in the Middle East have benefited from the relative lack of competition in both fixed and mobile markets and have been able to bring in impressive revenues,” said the report’s author, Daniel Jones. “However, as competition intensifies across the region, operators will have an increasingly tough time trying to maintain this premium.”

Key findings from the new report include:

• Total mobile service revenue is forecast to grow at a compound annual growth rate (CAGR) of over 10 percent, from $22 billion in 2006 to $39.7 billion by the end of 2012. In many countries, service revenue will be boosted by strong growth in subscribers, outweighing the effect of falling average revenue per user (ARPU), which will accompany subscriber growth in many maturing markets.

• Penetration across the region is set to grow rapidly, with liberalizing markets where penetration is furthest from saturation leading this growth. New mobile operators in Egypt and Saudi Arabia will be among the major catalysts for subscriber growth in the region.

• Low fixed-line penetration in the Middle East will allow mobile operators to capture a greater share of total telecoms spend than would otherwise have been possible and will present opportunities for mobile operators to increase their non-voice ARPU through the provision of mobile broadband.

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