A tough year awaits the mobile handset industry as global revenues are expected to decline in 2006 despite a small increase in unit shipments, a survey found on Wednesday. The average wholesale price of a mobile phone, the price paid to the manufacturer, will slip to $129 in 2006, a 9 percent drop from $142 in 2005, market research group iSuppli said.
The global mobile phone market is expected to rise to a staggering 850 million units, roughly double 2002's level and up 5 percent from the 810 million shipped last year.
This compares to a television set market of 200 million units a year, with handsets the single biggest consumer electronics category in the world.
But this year's shipment increase is not enough to offset the price decline, the research group said. As a result, total revenues will slip to $109.7 billion in 2006 from $115.1 billion in 2005.
The dip follows a three-year period of strong growth during which revenues grew from $68.7 billion in 2002 to $91 billion in 2003 and $110 billion in 2004.
The decline in average selling prices accelerated last year, falling 8.5 percent in 2005 against a mild 2.7 percent in 2004, due to much cheaper handsets from the likes of market leaders Nokia and Motorola which are selling phones for less than $40 in emerging markets, a price which was considered unattainable even a year ago.
There is also pressure at the very high end of the market, because mobile operators demand much cheaper phones for their advanced third-generation mobile networks which can deliver video and other multimedia services to handsets.
The cheapest 3G models still cost around $200.
The price declines, enabled by cheaper chips and clever redesign of the circuit board inside the phone, will slow down from 2007 onwards, iSuppli predicts. Unit sales will continue to rise and revenues for the global cell phone market will be back at 2005 levels in 2009, it said.
The other top five mobile phone vendors are Samsung Electronics, Sony Ericsson and LG Electronics. The top five vendors manufacture roughly 75 percent of all the world's mobile phones.