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NEW DELHI: The global mobile handheld device market is expected to reach $164.3 billion in 2012, as compared to revenues of $122.6 billion earned in 2006. According to Frost & Sullivan (F&S), manufacturers in the global handheld device market face the challenge of maintaining profitability despite slumping average price per unit. While growth in unit shipment increased by more than 14 percent over 2004, the average price per unit reduced by seven percent per year during 2002-2004. F&S has however advised that device vendors must continue to focus on creating low-cost alternatives to effectively exploit burgeoning growth opportunities in developing nations.
“Although mobile networks cover 80 percent of the world's population, mobile users comprise only over 25 percent of this share,” noted F&S research analyst Daniel Longfield. “Since developed markets are mostly saturated, device vendors will find it increasingly profitable to cater to low-income consumers in emerging markets with more economical options,” he added.
According to F&S, emerging markets have the potential to increase their customer base by 1.5 billion mobile users. In fact, the global mobile phone market is set to grow to two billion subscribers by the end of 2007, fueled by strong demand from developing economies in Asia and Latin America.
In order to offer low-cost handheld devices and maintain profitability, market participants must consider moving manufacturing centers to low-cost labor areas. For example, Nokia has implemented a successful cost-cutting strategy by building a multi-million dollar manufacturing center in Chennai. Moreover, overseas production also allows device vendors to remain close to high demand areas in Asia and consequently lower transportation and shipping costs.
Partnering with up and coming regional carriers is also likely to prove critical to penetrate into local markets and gain a better understanding of the specific needs of consumers in that region. While emerging markets are proving to be the ideal solution for sustaining revenues in the face of falling average price per unit (ARPU), the rapid commercialization of 3G services is likely to open up new opportunities in developed markets. This commercialization is largely in terms of decreasing the average life of equipment from 25-26 months to 16-18 months, which in turn increases replacement rates.
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