Replacement handset sales rule in 2007, says iSuppli

According to market-research firm iSuppli Corp., the number of handsets purchased as replacements this year will be double the number of first-time cellphone purchases, a statistic that could have significant implications for the market’s players.
iSuppli’s figures show that upgrade handsets sales-where a shopper is replacing an older phone-are increasing as the market becomes more saturated with cellular technology. The firm said upgrade sales will rise by 56.7 percent this year, more than doubling the 23.9-percent increase in 2006. The number of phones purchased as a replacement to an existing phone will hit 712 million units this year, iSuppli said.
Conversely, the number of first-time handset sales is slowing-iSuppli’s numbers show first-time cellphone purchases will drop 33.2 percent this year, after rising by 38.1 percent last year. The number of first-time cellphone purchases this year is predicted to reach 342 million units.
The figures are notable in that handset makers like Nokia Corp. and Motorola Inc. are basing a large part of their strategy on tapping emerging markets, where first-time cellphone shoppers predominate. iSuppli’s numbers call this strategy into question, as iSuppli shows that the market for replacement handsets-typical of mature markets like Europe and the United States-is by far the larger segment.
“Consumers now are more sophisticated about mobile phones than ever before, and are more likely to choose a replacement handset that best fits their needs-rather than simply buying whatever product is the cheapest,” wrote iSuppli analyst Tina Teng. “With upgrade consumers having become more discerning, and thus more likely to buy a phone with more features, the high end of the handset market is the place with the profitable growth.”