While market analysts generally foresee a strong 2004 for phones, changes in the mobile phone market are placing pressures on the growing supply chain, according to John Jackson, an analyst with Yankee Group's wireless and mobile technologies unit.
Advanced phones known as smart phones boast color screens, integrated cameras, downloadable Java capability and short-range Bluetooth radio links. The technologies quickly are supplanting the ``voice-centric category,'' Jackson said.
An example of supply stress was Motorola Inc.'s ``high-profile failure to deliver much-anticipated camera phones in quantity,'' Jackson said. ``We expect additional supply-chain hiccups, notably among vendors who outsource significant portions of their manufacturing.''
On Dec. 4, Motorola's personal communications sector in Libertyville, Ill., said shortages of lenses, typically of plastics, and complementary-metal-oxide-semiconductor image sensors were slowing holiday-season delivery of newer mobile phones with cameras. Motorola brought on two more suppliers. In boosting offerings to more than a dozen camera phones, Motorola said it began shipping the V300 and V500 models several weeks earlier and was nearing shipment of the V600.
Yankee Group of Boston projects global sales of 497 million to 505 million handsets in 2004, up from 474 million units last year. Domestically, 87 million units are expected to be sold in 2004 vs. about 80 million sets last year.
China, India and other markets will drive the volumes, ``but mature, replacement-driven markets such as Western Europe and North America still offer comparatively high replacement rates, robust volumes and enhanced revenue potential via higher-end handsets,'' Jackson said.
But the market is limited, he said.
``The overall sell-through volume potential for the market is finite and will peak within four years,'' Jackson said.
``Successful operators, handset vendors and their suppliers will recognize the market's limitations and focus on cost effectively enabling value-added services. This will require an increasing degree of vendor-operator cooperation amid a highly competitive and fragmented global market for handsets.''
Gartner Inc. projects 2004 global sales of 511.3 million mobile handsets, vs. the expected 2003 sales of 461.2 million terminals. Domestic projections are 110.9 million in 2004 and 97.6 million in 2003.
Smart phones are expected to account for one-third of all North American sales by the end of 2005, up from less than 1 percent in 2002.
Smart phones are overtaking so-called enhanced phones, which represented 60 percent of 2002 sales and will peak at 84 percent of North American sales in 2004, said Tuong Nguyen, a Gartner mobile and wireless industry analyst in Lowell, Mass.
Basic mobile handsets had a 40 percent market share in 2002 but should drop to 2 percent by 2005.
The Tokyo-based Japan Electronics and Information Technology Industries Association forecasts a 5.8 percent increase in 2004 worldwide demand for mobile phones, to 479.4 million units from about 453 million last year.
International Data Corp. of Framingham, Mass., anticipates that shipment of worldwide mobile phones might grow to 548.4 million units in 2004 vs. 507.4 million last year.
The domestic forecasts are 87 million in 2004 and 75.3 million last year.
For the quarter ended Sept. 30, Gartner said Nokia Oyj had a global mobile phone market share of 34.2 percent, Motorola 14.7 percent, Samsung Group 11.2 percent and Siemens AG 9.1 percent.