Competition driving smartphone takeover

While smartphones have captured the most industry buzz for the past couple of years, standard cell phones have always captured the majority of market share. This is changing at a rapid pace, however, with smartphone sales poised to overtake standard mobile phones by 2012, according to Infonetics Research's biannual mobile/Wi-Fi phones report.

Smartphones are on track to post a 14.5% increase in the number of units sold worldwide in 2009 and a 21% compound annual growth rate from 2008 to 2013, which is significantly better than any other mobile phone segment, said Richard Webb, directing analyst for mobile devices with Infonetics. To date, smartphones make up only 15% of the overall mobile handset market.

Webb said that smartphone revenue is expected to continue to dip in 2009 — as it has in earlier quarters — due to price erosion and lower average revenue per user units coming to market, but it will pick up in 2010 and continue growing, easily outstripping the combined revenue of standard mobile phones by 2012.

Nokia stayed in the lead for total mobile phone market share in the first half of 2009, but the handset that has attracted the lion's share of attention, Apple's iPhone, grew its market share to 17.1% in its fiscal fourth quarter, compared to 16.6% in the previous quarter. The second half of the year is proving more challenging, however, as the iconic device faces increasing competition from new handsets, such as the Motorola Droid from Verizon Wireless and Research In Motion's BlackBerry Bold 3G from AT&T. RIM passed Apple in smartphone market share with 30% of the market in the most recent quarter, but Webb said Apple's success would hinge primarily on Android.

“You are looking at a user group that has very similar priorities in terms of what it wants from a user experience and in mobile broadband from a smartphone device,” Webb said. “I would think Android will start mopping up people who might have gone for an iPhone instead. That will bring more competition to the iPhone. I think you are seeing more response from other vendors as well — like BlackBerry's Storm, Palm's Pre. There are some nice high-end smartphones coming out, but also cheaper, budget-oriented smartphones that you could consider as competition for smartphones as well, just for a slightly different market.”