Younger generations will continue to provide new customers as they come of age, but the phenomenal subscriber growth rates that define the market today will flatten out as the emphasis shifts toreplacement sales.
Before that happens, mobile handset vendors — until now focused on growing their user base more than on high margins – will have to redirect their strategies to deliver higher profits per unit, while attracting and keeping higher-level customers.
According to ABI Research analyst Brian Pellegrini, Motorola and Samsung illustrate the importance of strategic timing. “Last quarter,” he says, “they were neck-and-neck in shipments, with less than 1% market share difference between them. Then Samsung, anticipating the need for fatter margins, began to concentrate on high-end models. That will become necessary, it’s true. But by doing so now, rather than in three years, they lost out on the high growth rates in places such as China and India, where many people are buying their first phone of any kind.”
In contrast, Motorola continued to cover both options: the massive lower end of the market, and enhanced handsets for the growing replacement market. The result? Motorola has for the moment gained a significant lead. But as 2009 approaches, they can and should readjust their priorities, says ABI Research.
