Total Units Sold Fading as the Key Cell Phone Metric

Carl Weinschenk

There seems to be a key fact missing from IDC's assessment of the growth of the cell phone market. The firm says that year-over-year growth slowed between 2007 and 2006 compared to the previous year-over-year measure. While 2007 growth was 12.4 percent over the previous year, the larger differential between 2006 and 2005 isn't provided. Despite the reduced growth, the release paints a picture that is not negative. For instance, 334 million handsets were shipped in the fourth quarter of 2007, a record that was a 15.3 percent increase over the previous quarter.

 

In the bigger picture, it may be that unit sales are an antiquated way of looking at the market. The nature of cell phone distribution is changing significantly. I am not an economist (if I knew much about money, I wouldn't have gone into editing). But it does seem that if the term "post-commodity product" doesn't exist, perhaps someone from a fancy business school should think about it in the context of what is happening to cell phones.

 

In the U.S., cell phones have traditionally been all but given away by service providers in order to get people to use their networks. The iPhone bypasses that model and makes people pay full price if they want the product. This certainly seems like a move away from commoditization. The open network requirements that are part of the 700 MHz spectrum now being auctioned and the related move by Verizon also suggest non-commodity thinking. Instead of a neat scenario in which users are given the choice of three or four razor blades (or phones) to fit onto the service provider's razor (the network), subscribers will be able to bring their own, unsubsidized, devices.

 

The nature of the phones themselves is changing as well. At the high end, of course, the age of the smartphone as a mainstream item is upon us. The iPhone is just the tip of the iceberg in terms of sleek and hip designs. This post at AndroidGuys points to a lot of phones that can do iPhone-like things -- or better. The writer mentions HTC's TouchFlo and ubiquitous Microsoft's yet-to-be-released WiMo7. Customized features will continually emerge. TouchFlow, for instance, will know when the user is tapping (with a stylus) or poking (with a finger). Android, based on the large number and variety of vendors who will participate, is sure to unlock new worlds of innovation from predictable and unpredictable sources. Again, this suggests that commoditization is fading.

 

One trend seems to buck the move away from commoditization. Vendors are looking to sell very inexpensive devices into less-developed regions. In-Stat reports, however, that the Indian market, which was thought to be a key for this approach, is opting for more fully featured models. The firm distinguishes between "ultra-low-cost" phones and more expensive, albeit still relatively cheap, refurbished and inexpensive feature phones. Average mobile phone expenditures in India, In-Stat reports, is US$40.


 

The total number of units sold still is an important metric going forward. In the more open -- and far more interesting -- world of smartphones and open networks, however, its importance is slightly diminished.



Add Comment      Leave a comment on this blog post
Feb 5, 2008 5:14 AM Joseph Nadeem Joseph Nadeem  says:
informatics IT Business Edge,brilliant job keep it up and keep in touch with Renaissance Education Foundation Reply

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