NEW YORK, USA: Like many other illicit enterprises, China's vast gray-market cell phone business is one of those things that everyone knows about -- but few want to discuss.
However, with gray-market shipments in 2009 set to grow to 145 million units, or nearly 13 percent of the size of the legitimate global cell phone business, the gray market has become too big and too lucrative for the mobile handset supply chain to ignore anymore.
In a market-research first, iSuppli Corp. has managed to lift the veil on China's secretive gray handset market and develop an estimate of market size.
China's gray market wireless handset shipments are expected to amount to 145 million units in 2009, up a stunning 43.6 percent from 101 million in 2008. This will amount to 12.9 percent of the 1.13 billion unit global market for legitimate cell phones.
The gray market this year is set to nearly quadruple from 37 million units in 2005. In contrast, worldwide unit shipments of legitimate cell phones will decline by eight percent in 2009.
By 2013, the gray market will grow to 176 million units, expanding at a compound annual growth rate (CAGR) of 11.7 percent from 2008. In contrast, the legitimate cell phone market will achieve a CAGR of only 4.4 percent during the same period.
The gray market will peak in 2012 at 192 million units.
The figure presents iSuppli's forecast of gray-market cell phone shipments.
Gray-market handsets are cell phones manufactured in China that are not recognized or licensed by government regulators. Makers of these products generally do not pay China's value-added taxes and, therefore, profit illegally from their participation in the market.
Such phones employ fake International Mobile Equipment Identity (IMEI) numbers, which are used by wireless networks to identify valid devices. These phones also do not carry test/quality certifications or network entry permits.
Source: iSuppli, Nov. 2009
