In late 2004 and early 2005, most industry watchers predicted slowing growth in the handset business. Forecasts ranged from zero to less than 10%. The biggest initiative in the industry was extremely low-cost devices for emerging markets. The assumption was that the developed markets had become saturated, and growth would come from first-time users in developing countries. Then the market surprised everyone with strong 15% to 20% growth, reaching worldwide shipments of 800 million units for 2005.
This growth wasn't just in the extreme low-cost segment. The upgrade and replacement market is thriving everywhere. Customers are upgrading to handsets with color screens, multiple-format ringtones, cameras, and even innovative new case designs. Converged cell-phone/music-player models have appeared as well. The technology that enables these features will continue to evolve.
Surprisingly, innovations in analog technology are critical. Camera improvements will come from better optics, including autofocus and auto-zoom. Audio performance will rely on better audio amplifiers. Handsets with new user interfaces including touchscreen, fingerprint, and motion sensors will emerge. Power management, the most elementary of analog functions, will become more critical across the board.
The transition in air interfaces from today's 2/2.5G networks (GSM/GPRS, IS-95 CDMA) to 3G is well under way, and it will accelerate further in 2006. 3G network operators now subsidize 3G handsets to get devices into consumers' hands to create a market for new services that rely on the higher data rates available in 3G.
Regrettably, the industry's mid-1990s goal of a single worldwide standard for 3G cellular has gone by the wayside with multiple 3G standards instead. W-CDMA can be found in most of the world, including Europe, Japan, Korea, and the U.S. Also, cdma2000 1X is available in a few countries, including the U.S., Korea, and Japan. TD-SCDMA likely will be deployed in China and possibly elsewhere. And, there's TD-CDMA.
Everyone in the industry is watching China closely, since it is the largest market for cell phones with about 300 million subscribers. The government hasn't announced its 3G policy regarding which operators will use which technology. Its decision will have a huge impact on the industry. Networks probably will be rolled out before the 2008 Olympic Games in Beijing.
Evolutionary variants of 3G in development, including HSDPA and even HSUPA, will enable even more new services as data rates climb ever higher. In regions that have adopted W-CDMA, we will see the first HSDPA networks deploy in 2006. A few handsets will be on the market by mid-year.
Dual-mode cellular/VoWiFi handsets will emerge in 2006. Such handsets normally will operate on a cellular network. But they also will use a wireless local-area network (WLAN) (802.11b at 2.4 GHz) in consumer or enterprise environments when available using Voice over Internet Protocol technology. The recent completion of standards for handoffs between the WLAN and the cellular network has made this operation practical. Multiple handsets that will support this mode of operation will be introduced in 2006.