Smartphones Becoming More Popular

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Smartphones Becoming More Popular
By Mark Long
November 21, 2007 9:53AM

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One reason for smartphones becoming more popular is that smartphone makers have been reducing the complexity of their smartphones, said Gartner's Roberta Cozza. Touch-enabled smartphones from vendors such as Apple and HTC have been opening up new vistas for manufacturers beyond the Qwerty-style products popular with enterprise users.

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   According to the latest industry research, mobile handset customers -- in the U.S. and abroad -- have been snapping up smartphones at dizzying rates. The NPD Group reports that the percentage of smartphones sold during the third quarter increased to 11 percent of all handset sales in the U.S., up from just 4 percent one year earlier. The growth is equivalent to a stunning 163 percent rise from prior-year figures.

"The mobile phone market is not only growing, it is growing smarter," said NPD director Ross Rubin. "The nearly three-fold increase in smartphones shows that this once negligible niche is becoming a more influential force in the consumer market -- attracting entrants such as Apple and the Open Handset Alliance."

Growing at a Strong Pace

At the beginning of 2006, said Gartner principal analyst Roberta Cozza, Gartner attributed slowing smartphone sales to a lack of consumer awareness about the potential benefits of buying a smartphone instead of a feature phone. However, smartphone demand "has picked up strongly since the beginning of 2007" and currently "represents huge growth," she said.

One reason is that smartphone manufacturers have been reducing the complexity of their products, Cozza noted. "This has enabled markets like Western Europe and the Asia Pacific to focus more on driving smartphone sales as replacements," Cozza explained. "We have also seen a bigger push from Nokia to offer products that are more affordable."

Touch-enabled products from vendors such as Apple and HTC have been opening up new vistas for handset vendors beyond the Qwerty-style products popular with enterprise users. In North America alone, Cozza observed, third-quarter smartphone shipments had tripled year-over-year, thanks to the sale of 1.119 million iPhones.

From a global perspective, smartphone shipments during the third quarter rose by 55 percent to around 27.9 million devices, Cozza noted. In addition, vendors shipped another 5.4 million PDAs with cellular capabilities during the same period.

Cozza said she expects that, by the end of this year, there will be more than 100 million smartphones and cellular PDAs in the market, representing about 10 percent of all handsets worldwide. "This is the device category that is growing the fastest," Cozza noted.

Boom in Wireless Data Use

Cozza said she believes that smartphone vendors will continue to shift their focus from hardware to making improvements in applications, content, and services. "This should help this particular market segment to grow at a strong pace over the next two years," she predicted.

The trend toward increased smartphone sales is good news for handset manufacturers looking to boost the average selling prices of the products they sell. "A wide selection of devices, combined with declining initial price points, has made this segment of the market an immense growth opportunity for manufacturers," IDC senior research analyst Ryan Reith noted.

The robust sales of smartphones in the U.S. is also helping the nation's wireless Relevant Products/Services carriers to boost data-centric revenues. "This space is attractive for the operators because these devices are often bundled with a data plan, which in turn means increased revenue per user," Reith explained.

During the third quarter, for example, AT&T saw revenue from wireless data service rise by a robust 63.9 percent from the year-earlier period, followed closely by Verizon Wireless at 63 percent. T-Mobile came in third with growth of 36 percent over year-earlier figures. And even struggling Sprint Nextel posted respectable data revenue growth of 28 percent year-over-year.