Despite declining mobile handsets sales in 2009, smartphones continue to represent the fastest-growing and most profitable segment of the mobile handset market.

Volume sales were to grow by 33.5pc year-on-year in 2009 and by 36pc in 2010, said Informa Telecoms & Media.

However, the importance of the smart-phone segment is underlined by the fact that, although they will only account for 27pc of the total number of handsets sold in 2010, they will represent more than half (55pc) of the value of the total mobile handset market. Beyond that, they will account for almost two thirds (64pc) of the market in terms of profitability.

“The strong volume growth rate and high smartphone ASPs (average selling prices) make this the most profitable segment in the current mobile phone market,” said Malik Kamal-Saadi, principal analyst at Informa Telecoms & Media and co-author of Future Mobile Handsets report.

“In 2010, we expect profits from smartphones to represent an impressive 64pc of total mobile handset market profits. As demand for mid-tier handsets declines, competition in the smart-phone segment is set to intensify, which is forcing manufacturers to innovate and differentiate their products regarding hardware, software, and content,” he said.

The competitors

Attracted by the high volume growth and strong profit margins, many new entrants have entered or are entering the market. Volume market leaders like Nokia, Samsung, LG, Motorola and Sony Ericsson, are being challenged by RIM, Apple, HTC and Palm who are significantly eroding their market share in the smart-phone market.

Informa Telecoms & Media expects the market share of these four challengers to jump to 35pc of all smartphones sold in 2009 from 32pc in 2008 and just 24pc in 2007.

Key to the success of new entrants is the adoption of new smart-phone operating systems that have been built from scratch and better reflect the realities of modern mobile device requirements.

Also, they are not burdened with the support of a long legacy of devices and content already in the market. The key challenge for these companies is to further innovation instead of the mindless loop of OS upgrade cycles which can seem to the consumer innovation, but it is anything but that.

What’s on the table to offer?

“Volume market leaders have responded with a multitude of me-too iPhones, offering multi-touch and an enhanced internet experience but true innovation is still lacking from many incumbent OEMs’ portfolios.

“However, under the pressure of competition some incumbents such as Nokia and Microsoft are now revamping the architecture of their OSs to keep pace with innovation and some such as Motorola, Samsung, and Sony Ericsson is now radically changing their terminal software strategies.

“These players (Motorola, Sony Ericsson, and Samsung) have opted for Google’s Android as key OS to bring innovation to their smart-phone portfolios. These changes will completely transform the smart-phone market landscape and could potentially lead to the emergence of new leaders in the mobile handsets market,” Kamal-Saadi concluded.

Article courtesy of siliconrepublic.com