Handset evolution benefits chip makers

The last few years have been very good ones for handset chipmakers, as new technology has quickly been integrated into many handsets, prompting users to upgrade, says analysts InStat/MDR. This, combined with continued subscriber growth, worldwide, especially in emerging nations, means the number of new handsets produced each year continues to increase at a rapid rate.

However, the company finds that supplying components for this market can be challenging for handset chipmakers, because not only can consumers’ tastes change at a rapid pace, but also because handset component content can vary greatly from one region to the next.

The mobile handset market has been going through a complete evolution in the last few years, keeping chipmakers on their toes while they attempt to forecast what will be the next big thing. History shows that handsets can change quickly. For example, cameraphones went from zero to 150 million in two years.

InStat says that behind the trends in handset components are the trends in the handsets themselves. These trends, in many cases, are not driven so much by what consumers are demanding, but by what carriers want consumers to have in their handset, so that they can then reap the services revenues from these features.

At the very least, carriers want their handsets to be attractive to potential customers, so that they can steal away business from their competition.

Both chipmakers and device makers lower their prices by standardising a set list of features and producing them in high volumes, the carrier’s need to differentiate can be in direct conflict with the hardware maker’s need to standardise.

In its research InStat also found that: The number of application processors used in handsets is expected to increase dramatically, from nearly 19 million this year to 92 million in 2008;

The MPEG-4 chip market for handsets is ripe for growth. With not only video and camera functionality driving demand, but, eventually, Direct Broadcast (DB) services which will start to appear in handsets as well demanding MPEG-4 devices;

By 2008, roughly 56 percent of all handsets shipped will have Bluetooth capability;

Overall, while unit numbers are steadily increasing, ASPs are dropping, and add-on components to the core handset chipset won’t be able to offset this decline.

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