Cell phone makers look to Asia for sales

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BOSTON (Jan. 31, 3:05 p.m. ET) — The mobile-handset market is growing in developing countries and the Asian market, and through the spread of Smartphone technologies.

Carl Howe, vice president for data sciences research with Yankee Group Research Inc., said he is “cautiously optimistic for plastics” in areas outside developed markets as “a new set of criteria arise.”

For instance, extreme environments such as arid deserts or humid jungles are “not friendly to a Smartphone,” Howe said. Recognition of such challenges has led some manufacturers, including Nokia Corp., to rethink material specifications and other design options to identify workable technologies.

In pricing, “we are getting close to reaching most people who can afford a phone,” he said.

Even if people in developing areas “cannot afford an iPhone 4S, they could afford an iPhone of three generations ago,” Howe noted. “They want the same things we do.”

The 2012 projections for handset shipments are flat for North America and growing for Asia, said Wayne Lam, senior analyst with IHS iSuppli, a market research and consulting firm in El Segundo, Calif.

“If you have a 98 percent penetration rate, the only growth is through population gains,” Lam said.

He forecasts 2012 shipments of 178.3 million vs. 178.2 million last year in the saturated North American market, where “a good percentage will be for new subscribers and [faster] upgrade cycles.”

The 2012 global shipment projection is 1.53 billion handsets in comparison with 1.45 billion in 2011, with the biggest growth expectd to be in Asia, where penetration is low, he said.

The fast-growing niche for Smartphones with new features should account worldwide for 643 million handsets, up from 477 million in 2011. The North American numbers are 132 million in 2012 vs. 107 million last year.

Lam noted that Apple Inc. of Cupertino, Calif., uses primarily glass and stainless steel in most devices, with plastics for its low-end products.

He reported that HTC Corp. of Taoyuan City, Taiwan, is “trying to catch up [with Apple] and do similar things,” currently by producing unibody-frame constructions of aluminum.

On Jan. 18, IHS iSuppli reported that during 2011, Apple procured 349 million microelectromechanical system (MEMS) microphones for iPads, iPhones and headsets, up from 128 million in 2010.

A package serving as an environmental and interference shield for a MEMS microphone includes a silicone-based microphone, layers of conductive and nonconductive materials and a formed cup cover. Each device has a pressure-sensitive diaphragm etched on a semiconductor.

Knowles Electronics LLC of Itasca, Ill., dominated 75 percent of the global MEMS microphone market in 2011, down from 88 percent in 2010, according to IHS iSuppli. Knowles supplies the devices to Apple, Samsung Electronics Co. Ltd. of Seoul, South Korea, LG Electronics Inc. of Seoul and Motorola Mobility Holdings Inc. of Libertyville, Ill.

In the handset market, Lam foresees 2015 as a tipping point globally, with high-end Smartphones commanding the market and feature phones in the minority.

Using different parameters, Yankee Group forecasts 2012 global sell-through of 1.79 billion mobile handsets vs. 1.71 billion last year. The U.S. projection is 176 million in 2012, up from 174 million in 2011, Howe reported.

Smartphones will experience major growth, to 707 million from 523 million, with the U.S. portion rising to 144 million for 2012 from 116 million last year.

Meanwhile, Yankee projects a decline in 2012 global shipments of traditional feature phones, to 986 million from 1.01 billion in 2011. The U.S. shipments are expected to drop to 31.2 million from 58 million last year.

Boston-based Yankee Group’s statistics for the year ended June 30 show Nokia of Espoo, Finland, atop the global handset business, with 431.1 million shipments to carriers.

For the same period, Samsung shipped 293.4 million units, LGE 108.3 million, Apple and Shenzhen, China-based ZTE Corp. 69.3 million each, and Research in Motion Ltd. of Waterloo, Ontario, 54.3 million.

Samsung led the North American market with 49.9 million shipments for the year ended June 30, according to Yankee Group. LGE logged 34.4 million, Apple 27.9 million, Motorola 23.3 million and RIM 21.6 million.

Howe noted that shipments to mobile service providers might not translate directly into revenue. “The mobile carriers will often stockpile phones and then later send back unsold ones,” Howe said.

In a sign of the times, Telefonaktiebolaget LM Ericsson of Stockholm agreed in October to sell to Tokyo-based Sony Corp. its stake in cell-phone joint venture Sony Ericsson Mobile Communications AB for 1.05 billion euros ($1.5 billion). Ericsson and Sony created the venture in October 2001, but it never gained sufficient product content or market size to compete effectively in the mobile-handset business.

Sony Ericsson handset shipments have fallen and, among 10 manufacturers, were 10th for the year ended June 30, according to Yankee Group. More than one-half of the shipments went into the Asia-Pacific market.

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