Sony Ericsson, by most measures the fourth-largest handset company in the world, missed analysts’ estimates for the last quarter. The age of the endless growth of cellphone purchases may have come to an end. It may not be as temporary as the period of the recession. The market for cell phones may have reset for good.
Management at Sony Ericsson estimates that handset growth last year was about 6%., Their view of this year is that it will be worse.
Reuters writes that the firm’s CEO said "Sony Ericsson forecasts that the global handset market will contract in 2009 and that the industry ASP will continue to decline."
Cell phone sales have been close to one billion units each of the last three years. They were not much below that in the three years before that. Many of the latest sales were upgrades from older phones. Viewed through the lens of that data, it is safe to say that most of the people in the world who could own a handset already do.
Rapidly growing markets like India and China have driven the lion’s share of the increase in handset sales. Those markets are now moving into economic slowdowns which could quickly become recessions. Consumer spending will fall rapidly. Cell phone sales will be undermined.
Consumers worldwide are looking at all major purchases the way they look now at buying a new car. A phone does not have to be replaced every year. The latest generation of phones, most purchased in the last several quarters, could last frugal owners for a long time. A car can run for 100,000 miles. Why replace it? A cellphone can work for 10,000 hours, so the same thought process is starting to take hold.
Douglas A. McIntyre
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