Cellular Phone Mania Sweeps the Globe. Cellular handset market a key component to IC industry growth in 2006 and beyond

ICinsights: A mania continues to sweep around the globe in 2006---a cellular phone mania. Although the computer market is still by far the leading consumer of ICs and is forecast to represent 47% of the 2006 IC market, the electronic system type driving most of the IC market growth this year is cellular phones.Figure 1 shows IC Insights' forecast for the worldwide cellular phone subscriber base through 2007. As shown, three billion subscribers are expected to be in place by the end of next year! This amazing figure would represent about 45% of the world's population of 6.6 billion in 2007!

Historically, forecasts for the number of cellular phone subscribers have always underestimated actual results. While three billion cell phone subscribers appears to be an aggressive figure, IC Insights' forecast for the 2007/2006 subscriber base increase is only 14%. Given that the annual increase for cellular subscribers has never been less than 20%, this forecast may still turn out to be conservative

In 2006, IC Insights forecasts 965 million cellular handsets will be sold, an increase of 20% over 2005! Moreover, it would take a handset growth rate of only 3.6% to push worldwide cellular phone sales over the one-billion-unit level in 2007!

While much is talked about regarding an increase in cheap cellular phones for the emerging markets (e.g., India), cellular handset ASP is forecast to decline only 4% in 2006 (to $130), the same rate of decline as in 2005. With a large percentage of cellular phones being shipped as upgrades to existing subscribers (over 50% in 2006), the demand for high-end cellular phones is keeping the overall decline in handset ASP very moderate.

The cellular phone industry is expected to be one of the most important, if not the most important, future IC market drivers. The long-term market potential from interconnecting more than half of the world’s population to cellular networks (probably shortly after 2007) is staggering. Overall, this segment of the communications market promises to be a very strong source of future demand for the IC industry. IC Market Drivers Publ 20060918