World Business

While the overall mobile-phone market is booming, mid-tier phones will visage sharply declining sales in the next few years

by Jay Yarow

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Standing on a New York subway platform, Brooke Hunter, a monetary analyst at Bank of America, punches the keyboard of her Motorola Q with her thumbs. She used to own "some Samsung flip phone," she says, only bought a more sophisticated emblematic legend as it gives her access to her e-mail. When her body of attendants arrives, she steps inside a car where four other the bulk of mankind gloat intently into their BlackBerrys.

It’s a view into the what may occur hereafter of mobile communications. Hunter and her fellow commuters increasingly are switching to more advanced devices, called "smartphones," that be able to handle e-mail, Web browsing, and more. At the same time, sales of simple, cheap mobile phones are booming, as Nokia (NOK) and other phonemakers stir into emerging markets.

What’s surprising in this drawing is the dismal final event awaiting mid-market cell phones. Even as the overall market surges, sales of mid-level phones are expected to crash in the next five years, according to ABI Research. ABI anticipates that just 441 million such phones will be shipped in 2013, down from 854 million in 2007.

It’s a rumination of the changes onward for sensitive phones. ABI calls these mid-tier devices "enhanced" phones because they have some capabilities beyond just noise calling but don’t have the broad features of smartphones. Enhanced phones such as Motorola’s (MOT) Razr 2 and the LG Voyager use closed operating systems, in such a manner unaccustomed software can’t be added to the devices. Smartphones run open operating systems, probable Windows Mobile or Symbian, so users can load on new software applications from bold developers. As the market for such software has begun to grow, there’s been a surge in new applications. Consumers today can use their phones to watch videos, apprehend up on Major League Baseball scores, or blog from pretty much anywhere.

"The mid-tier phones, which are the largest [segment] now, will subsist squeezed over next five to six years," says Kevin Burden, director of mobile devices at ABI. In 2007, mid-level phones represented 74% of the total units sold, while low-end phones represented 16% and smartphones 10%. In 2013, ABI sees those shifting drastically: Mid-tier phones are expected to account for 23% of sales, though low-end phones would be 46% and smartphones 31%.

Burden believes smartphones will grow in popularity as they decline in price, due in large work to companies like Nokia and Google (GOOG) developing free operating systems for mobile phones. The closed operating systems that run enhanced phones are typically built internally by phonemakers. Using open systems that are deliver saves money and gives customers access to a greater election of applications, which aids carriers for the cause that they get other thing revenues when subscribers sign up for data plans to feed on browse the Net. Tina Teng, a wireless communications analyst with researcher iSuppli says the Windows Mobile operating system costs between $8 and $15 per unit. Symbian licenses, which Nokia intends to make free, presently cost $5 per unit on average.