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To: Johnny Canuck who wrote (44911)	7/25/2008 12:19:42 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69318

Handsets on track for growth despite declining prices Dylan McGrath (07/23/2008 10:55 AM EDT) URL: eetimes.com SAN FRANCISCO — After jumping 16 percent in 2007, global mobile handset sales growth could top 10 percent in 2008, reaching nearly 1.3 billion units, according to projections from analysts and vendors. But projected unit growth is being partially offset by declining average selling prices (ASPs). Price declines stem from factors like the weak U.S. dollar and the popularity of lower-priced handsets in emerging markets, where most of the unit growth is occurring. Market leader Nokia Corp. saw its handset ASPs decline 6 percent in the second quarter to 74 euros. Sony Ericsson reported a similar quarterly ASP decline of 4 percent to 116 euros. While not providing quarterly ASP figures, LG Electronics Inc. said operating profit margins for its cellphone unit reached an all-time high in the second quarter. Still, LG warned of possible ASP declines beginning in the third quarter. Handset makers cited several factors for the declines, including higher proportional demand for low-end phones, increased competition and economic factors like the weak U.S. dollar. Rick Simonson, Nokia's CFO, said 40 percent of Nokia's second quarter ASP decline was due to movement in currency valuations. Tina Teng, an analyst with iSuppli Corp. (El Segundo, Calif.), is projecting handset unit growth of 9.1 percent for 2008. But based on industry-wide ASP declines, Teng expects revenue to grow just 7 percent. Teng estimated that overall handset ASPs declined from 123 euros to 120 euros in the second quarter. "We can't really fool ourselves; we are in a market where ASPs are going to go down," added Carolina Milanesi, research director of Mobile Devices for Gartner Inc. Milanesi is projecting 10 to 11 percent volume growth in 2008. She said vendors would continue to push high-end smartphones as a way to avoid overall price erosion. Analysts expect a strong second half for handset makers, due in part to new product introductions like Apple's iPhone 3G. Research in Motion Ltd.'s new Blackberry Bold is due out next month, while Nokia has already announced 10 new high-end phones that will be available during the second half. More Nokia phones are on the way later this year. Sony Ericsson started shipping 12 new models in the second quarter, including several mid- and high-end Cybershot and Walkman models. Apple made headlines this month by selling more than 1 million iPhone 3Gs in the first three days. But 1 million phones is a drop in the bucket for a market expected to approach 1.3 billion annually. Nokia sold on average 1.3 million handsets per day in the second quarter, and nearly 1.2 million per day in 2007. According to Will Strauss, principal researcher at Forward Concepts, Apple shipped about 5 million handsets in 2007 and could ship about 10 million in 2008. Strauss said "iPhone envy" among consumers may benefit other handset makers, especially as customers of CDMA carriers such as Sprint and Verizon look to upgrade their phones to new touch-screen "iPhone killers" like Samsung's "Instinct" or LG's "Dare." Introduced in June, Instinct has been a hit -- within two weeks of its rollout, Sprint said it was the fastest-selling EVDO handset in its history. Best Buy reported that Instinct was selling faster than any handset offered by the retailer over the past two years. A spokesperson for Sprint declined to say how many Instinct phones have been sold. Overall, handset sales are highest in emerging countries like China, India, Russia, and Brazil. All are still reporting wireless subscriber growth. According to Jagdish Rebello, director and principal analyst at iSuppli, India continues to add 6 to 7 million subscribers per month. In China and Latin America, subscriber growth has slowed recently, but remains relatively strong, he said. With most growth coming from emerging markets, iSuppli's Teng predicted OEMs would continue to look for ways to trim costs to protect margins and boost market share. She cited Sony Ericsson's announcement earlier this month that it would eliminate approximately 2,000 jobs. Strauss said healthy volume growth projections are good news for handset chip makers,, particularly Texas Instruments Inc. and Qualcomm Inc., which supply chips to Nokia and Samsung, respectively. Citing World Semiconductor Trade Statistics, Strauss noted that DSP and RISC shipments in May for cellphones grew 8 percent sequentially and 47 percent year-on-year.