While nothing seems to be totally immune to the economic downturn, except perhaps government growth, the wireless industry is still performing better than most.
Revenue is down, but the subscriber rate is up. U.S. carriers added 15 million new subscribers in 2008, boosting the total to more than 270 million by the end of the year. Just over 2.2 trillion minutes were used for voice calls alone in 2008. Total cellular revenue topped $148 billion.
Cellular remains strong because the cell phone has become an inherent part of all our lives. It has evolved into a utility that’s as important as water and electricity. So while we cut back in other areas, we still buy cell phones and service plans and increase their usage. As CTIA president and CEO Steve Largent said recently, the cellular industry is a “shining light in these troubled times.”
THE OUTLOOK: IT COULD BE WORSE
Most handset manufacturers noted negative growth figures in the fourth quarter of 2008 and first quarter of 2009. These drops range from 10% to 50%. ABI Research estimates that worldwide handset shipments will fall by at least 8% in 2009. But that’s a great deal better than other sectors of the electronics business. ABI also projects 2010 sales to be flat rather than down.
All of this negativity is offset by large gains in other sectors of the business, such as a 30% growth rate in revenue in smartphones and large increases in infrastructure spending on the forthcoming 4G technology Long-Term Evolution (LTE) and backhaul. Apple saw iPhone sales increase 123% in the first quarter versus the same period last year.
Another perpetually percolating sector is data services like messaging, e-mail, and Internet access. For example, over 1 trillion short message service (SMS) texts were sent last year, with 620 million in the third and fourth quarters alone. Such data revenue, including video, is expected to maintain that climb even during down times.
WHAT’S HOT IN HANDSETS?
There’s little doubt that the strongest cellphone category involves smartphones like the iPhone and BlackBerry. Almost all manufacturers are adding new models and improving existing models. Smartphones typically include Wi-Fi, GPS navigation, Bluetooth, a camera, and an operating system (OS) that allows e-mail and Internet browsing.
Even non-cell-phone manufacturers are rumored to be considering smartphones, including Asustek, Dell, Lenovo, and Microsoft. Toshiba recently announced a smartphone, and Elektrobit is offering a smartphone reference design that includes satellite access (Fig. 1). Palm started the smartphone trend years ago, but the iPhone set off a spectacular resurgence of new activity. Recent acquisitions and hiring plus rumors seem to indicate that Apple will start designing and building its own silicon to gain a lead or advantage in this competitive category.
Smartphones are still a relatively small category, representing about 23% of all handsets, but that’s quickly changing. Nokia and RIM lead this segment, though others are making headway like Apple, Samsung, LG, and T-Mobile with its HTC G1 Android phone. Palm’s new Pre is an attempt to get back into this space, which it dominated just a few years ago.
Probably the biggest news in smartphones, as well as all handsets, is the touchscreen. Almost everyone has one now, including some of RIM’s BlackBerry models. Apple really started this trend, and now everyone seems to think it is a necessity.
According to Wirefly, the leading touchscreen phones are the LG Vu (AT&T), Samsung Eternity (AT&T), Samsung Behold (T-Mobile), LG Voyager (Verizon), LG Incite (AT&T), BlackBerry Storm (Verizon), Samsung Instinct (Sprint), LG Dare (Verizon), Motorola Krave (Verizon), and HTC G1 with Google Android (T-Mobile). Keyboards won’t go away, but their percentage of the pie is shrinking.
Applications stores also feed smartphone growth with new software. Again, Apple leads the way with its online store offering a plethora of downloadable software. In fact, Apple recently reported more than 1 billion downloads of over 35,000 apps. RIM announced an apps store for the BlackBerry, and Nokia offers the Ovi store. Google has an applications store for its Android phone as well.
The “open” movement has produced some great new software from independent third parties in addition to a new revenue stream. Many other apps stores are in the works, with efforts coming from AT&T, Verizon, and Microsoft. The key to smartphone growth and leadership seems to be attracting third-party developers to the operating system (OS) being used. That’s why the OS and the availability of software development kits (SDKs) and support continues to foster a healthy outlook for smartphones.
Of course, netbooks are a major player in the PC area, but they may also provide some stiff competition for smartphones (see “Laptops, Netbooks, And E-books, Oh My!”). While netbooks will still perform everyday tasks like word processing, they mostly will act as communications devices for accessing e-mail and the Internet.
Right now, Wi-Fi is built into every laptop and netbook. WiMAX will also get a piece of that business. Now the trend is to embed 3G and 4G cell-phone modules into these devices as well. Qualcomm’s Gobi chipset tackles the entire wireless job inside the netbook. In fact, carriers like AT&T offer netbooks as part of their cellular lines, and they will subsidize them like handsets. You can pick up a good netbook for $50 if you sign up for a two-year data contract.
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