Smartphones outship feature phones for the first time

By Chantal Tode for Mobile Marketer

The market for smartphones is growing at a faster pace than previously expected and, as a result, these devices are expected to account for the majority of global mobile phone shipments by next year, according to a new report from IHS.

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Smartphone dominance of mobile phone shipments is coming two years earlier than expected, driven by growing demand from developed regions for high-end models. Additionally, there has been an unexpectedly strong push from emerging economies for lower-cost models.

“We’ve been calling smartphones as uniquely different from mobile phones but now that we are crossing this threshold where smartphones are starting to become the dominant mode of wireless communications, this is a fairly significant event moving forward,” said Wayne Lam, a senior analyst with IHS iSuppli.

Implications for marketers
The IHS iSuppli Wireless Communications Market Tracker Report forecasts that smartphone shipments next year will account for 54 percent of the total mobile phone market, up from 46 percent in 2012 and 35 percent in 2011.

The research firm expects shipment growth in smartphones to continue to be in the double digits for the next five years. As a result, smartphones are expected to represent 67.4 percent of the total mobile phone market by 2016.

The growth in smartphones has significant implications for marketers as these devices offer many more marketing opportunities than feature phones.

“This opens up a lot of eyeballs because smartphones tend to have larger screen real estate and are app driven,” Mr. Lam said.

“If marketers see this shift and people moving toward the mobile platform, you will see the dollars flow there.

“This is one of the key things is the ability for smartphones to do more than just talk about – it is about a really rich experience and giving marketers a treasure trove of very specific information that they can do things with.”

Feature phones fizzle out
Some of the trends impacting the fast growth in smartphones over the past year include a drop in price and the availability of a wider variety of models. Additionally, manufacturers are increasingly focusing on delivering multifunctional capabilities that enhance the user experience, making the devices attractive to consumers.

Continuing growth in the mobile applications market will also help drive consumers to the smartphone segment.

Within the smartphone market, manufacturers are introducing affordable, low-end smartphones in developing countries and emerging markets. Low-end smartphone users will likely be first-time smartphone consumers and will represent 43 percent of the total smartphone market by 2016.

Mid-range to high-end smartphone users are in the developed countries or in the more industrialized urban areas of some developing nations. This group of smartphone users will continue to outnumber low-end smartphone users, with more than 700 million midrange to high-end smartphone users forecast by 2016.

The rise of smartphones comes at the expense of feature phones, which had a 46 percent share of the market last year. However, that number is expected to drop to 41 percent this year and continue to decline going forward.

By 2016, IHS forecasts that feature phones will have a 28 percent market share, less than half the share of smartphones by that time.

Entry-level and ultra-low-cost handsets will also continue decline. The market share for this category in 2012 is expected to be 14 percent but that number will drop to just 4.2 percent by 2016.

“It really speaks to how manufacturers need to create devices that satisfy these emerging uses,” Mr. Lam said.

“Phones are becoming more and more capable and manufacturers are going to be looking for ways to differentiate their offerings from other brands.

 Chantal Tode is associate editor on Mobile Marketer, New York

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