ABI Research: Cellular Handset Makers' Dilemma: Will Only Cost Optimized Products Succeed?|

ABI Research predicts that "after another strong quarter of growth in 1Q06 that saw 210 million mobile phones shipped and a 23.8% rise on the same period of last year, the market is showing signs of fragmentation and segmentation. This will have a significant impact upon manufacturers' strategies and will identify which vendors are best placed to benefit from these changes."

Jake Saunders at ABI Research said, "Operators and dealers are keen to keep up the previous fourth-quarter holiday season's momentum. Innovative handsets with novel features, at the right price points, are helping end users to open their wallets."

The firm thought that "growth in price-sensitive emerging markets, and the general segmentation of the market, pose some interesting questions for manufacturers." Either handset manufacturers can "address all segments, especially the low tier market, make less profit per handset, and aim for volume. Their huge handset market share would then allow them to bully suppliers into lowering costs and providing innovative silicon approaches that can be applied across their whole range."

Alternatively, "they can disregard this lower-cost segment completely and focus on lucrative niches, as is the case with Sony Ericsson. Although it will return a healthy profit per unit, this is a dangerous ploy: the market for these devices is far smaller than the market for lower-cost products."

Stuart Carlaw at ABI Research said, "There is no secret about how Motorola (MOT) and Nokia (NOK) have grown their market share in 1Q06. They have broad enough portfolios to address all market segments, as well as cost-optimized handset offerings that can take advantage of the unique market conditions in the emerging regions."