Smartphones Still Have Growth Ahead

Implications: There is still plenty of growth left in the smartphone market but device manufacturers and operators must continue to innovate to entice customers to keep upgrading.  

Analysis: The cycle continues...mobile device manufacturers try to deliver innovative handsets that drive customers to upgrade their phones faster, mobile operators like the idea of devices with enhanced data capabilities but dislike subsidizing the products, while consumers have to balance budget and contract obligations (where relevant) with their seemingly insatiable appetite for new mobile gadgets.  

This cycle has been going on for over a decade, and the only difference now is that there is negligible subscriber growth in developed countries, so device sales in these markets are largely from phone replacements.  In contrast, emerging markets have significant customer growth remaining before they depend largely on upgrades (and smartphones).  

As Nokia, Samsung and Sony Ericsson recently warned, phone sales may be slowing, and customers may look to lengthen their replacement cycles.  Despite the warning, smartphones, with their enhanced mobile data capabilities, including mobile Internet, GPS and email, still represent a compelling value for mid and high-end consumers moving more of their lives to the mobile arena and looking to stay current with the technology.  The smartphone market will continue to grow but device manufacturers, operators and application providers must provide compelling devices and services, especially in difficult economic times.