Electronics Production | October 02, 2008

Part 4: IC Insights lowers 2008 IC market forecast by 3 points

The market researcher IC Insight has lowered their IC market forecast - in their September Update of the McClean Report - by 3 points. <i>Part 4 of 4.</i>
Cellular phone mania continues
In 2006, IC Insights talked about a mania sweeping the globe—a cellular phone mania. The IC industry is currently enjoying a subdued continuation of this mania in 2008. Although the computer market is still by far the leading consumer of ICs and is forecast to represent about 48% of the 2008 IC market, an important driver for IC market growth this year continues to be cellular phones.

The above chart shows IC Insights’ forecast for the worldwide cellular phone subscriber base through 2008. As shown, 3.9 billion subscribers are expected to be in place by the end of this year. This amazing figure represents more than half (58%) of the world’s 2008 population of 6.7 billion, up from a penetration level of only 15% in 2001 (chart below)! Moreover, as shown in the previous chart, about 1.2 billion subscribers are forecast to be added over 2007 and 2008, with over two billion added over the 2004-2008 timeperiod!

Historically, forecasts for the number of cellular phone subscribers have always underestimated actual results. While 3.9 billion cell phone subscribers appears to be an aggressive figure it should be noted that IC Insights’ forecast for the 2008/2007 subscriber base increase is only 17%. Given that the annual increase for cellular subscribers has never been less than 20%, this forecast may still turn out to be conservative!

The chart below shows IC Insights’ forecast for worldwide cellular phone unit shipments by major supplier for 2008. As shown, 1.26 billion cellular handsets are expected to be sold in 2008, an increase of 11.5% over 2007!

While much is talked about regarding an increase in cheap cellular phones for emerging markets (e.g., India), the cellular handset ASP is forecast to decline only 1% in 2008, one-quarter of the 4% decline witnessed in 2006. With such a large percentage of cellular phones being shipped as upgrades to existing subscribers (over 55% in 2008), the ramp up of high-priced iPhone, Google-phone, and other smartphone shipments this year (chart below), and the weak U.S. dollar versus the euro, the 2008 industry-wide total cellular handset ASP decline expressed in U.S. dollars is expected to be very moderate.

The cellular phone industry is likely to be one of the most important, if not the most important, future IC market drivers. In IC Insights’ opinion, the long-term market potential from interconnecting more than half of the world’s population to cellular networks (which occurred in December of 2007) is staggering. With feature-rich phones (MP3, cameras, web access, e-mail, TV, etc.), this segment of the communications market promises to be a very strong source of future demand for the IC industry.

Chart Source: IC Insight


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