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"Infotainment" Reason to Upgrade - Report
Posted: 15-May-2003 [Source: ABI]

[ABI's new report projects handset replacement cycle to shorten driven by new infotainment applications and deployment of feature-rich devices.]

Oyster Bay, NY -- Wireless users are migrating toward feature-rich devices that incorporate color screens, advanced data, and messaging applications, including navigation, gaming, multimedia messaging, and instant messaging, among others. The market is moving from one of initial penetration to one of innovation, or replacement with next-generation devices. In addition, wireless operators are under increased pressure to drive higher average revenue per user (ARPU), and are doing so by adding data services and "infotainment" content available only on newer technology handsets, thereby giving the consumer a reason to upgrade.

"With handset makers and wireless operators developing new devices and compelling services, the replacement cycle will shorten, thereby accelerating growth in the handset market," states ABI analyst Kenil Vora. "The key to maintaining this growth is the successful deployment-and timing-of feature-rich devices and related services."

According to research from Allied Business Intelligence Inc. (ABI), the number of replacement handsets shipped will grow from 211 million in 2002 to 591 million units in 2008, representing nearly 85% of all shipments worldwide at that time.

As such, to keep up with consumer demand for newer handsets with more advanced features, the suppliers of integrated circuits (ICs) to handset manufacturers must offer increasing levels of functionality-while still maintaining the products' sleek looks and longest possible battery life. The race is on for IC suppliers to offer manufacturers-as well as the end user-the complete package.

Because of this anticipated growth, the market for handset ICs, currently at $8.7 billion, is expected to grow to approximately $12 billion by 2008 with a compound average annual growth (CAAG) of 5%.

This available market projection includes consideration of the core components in the communications chain, including digital baseband, analog baseband, power management, RF transceiver, and applications processors. However, of the core components, the applications processor represents the biggest growth opportunity for handset IC suppliers, with sales to manufacturers expected to reach over $2 billion in 2008 at a CAAG of 120%.

"The key to this market going forward is for IC suppliers to support handset vendors with a complete solution," explains ABI senior analyst Tim Shelton. "The applications processor is the next burgeoning opportunity for IC suppliers to capitalize on."

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