(November 8, 2010) — The worldwide smartphone IC market forecast is expected to register a strong 20% 2010-2014 CAGR, according to IC Insights’ new 2011 edition of its IC Market Drivers report (to be released in November).

The report shows that there will be an estimated 3.63 billion unique cellphone users in 2010. This figure represents about 53% of the world’s population and does not include SIM-card subscriptions or multiple subscriptions by a single user. Although this is an extraordinary figure, it is only 10 points from IC Insights’ forecasted maximum worldwide cellphone penetration rate of 63%. As the ceiling for the penetration level of unique cellphone users in a country or region is reached, new cellphone handset sales into these regions will become almost entirely dependent upon replacement sales and multiple sales to existing cellular subscribers.

Because of this trend, IC Insights forecasts that over 90% of the cellphones sold in 2014 will be replacement cellphones or additional cellphones sold to existing subscribers. With regard to the cellphone industry, 2010 is shaping up to be "the year of the smartphone." A strong 13% increase is expected for total cellphone handset shipments this year after a 2% decline in 2009. It should be noted that all of the three top-10 cellphone suppliers that are expected to register the highest unit shipment growth in 2010 — HTC, Apple, and RIM — are entirely dedicated to shipping smartphone handsets. Moreover, the three top-10 companies that are expected to show a 2010 decline in cellphone unit shipments — LG, Sony/Ericsson, and Motorola — have all recently increased their focus on the smartphone segment and each of them is expected to perform much better in the second half of 2010 as compared to the first half because of these efforts.

Although the average IC value in a cellphone is expected to be almost $30 in 2010, there is almost a 9:1 difference in IC content in a smartphone as compared to a "basic" model. Besides the increased cost of a camera chip, Bluetooth module, multimedia processor, etc., the smartphone contains 15X the amount of memory-device costs as compared to a basic voice-centric phone. In fact, smartphones now require significant amounts of DRAM in addition to large amounts of NAND flash memory.

In general, the more advanced the cellphone, the higher the IC content percentage will be. For example, the expected 2010 IC content of a basic cellphone is only about 22% of the basic cellphone ASP of $36. As would be expected, smartphones contain the highest percentage of IC content with about 31% of their 2010 ASP due to the value of the ICs.

Figure 1. 2010 estimated cellphone IC market by handset type ($42.5B)

As mentioned, 2010 is shaping up to be the "year of the smartphone" in the cellphone market. Figure 1 shows the estimated $42.5 billion 2010 cellphone IC market segmented by handset type. As shown, the smartphone portion is expected to be the largest market for cellphone ICs in 2010 (47%). This is the first time that the smartphone IC market will outpace the enhanced cellphone IC market (46%). In contrast, the basic cellphone IC market (7%) is expected to be only $3.0 billion in 2010, representing only about 15% of the
almost $20.0 billion 2010 smartphone IC market.

The differences between the basic, enhanced, and smartphone IC markets are forecast to become increasingly pronounced over the next five years. Overall, the smartphone segment of the cellphone IC market is forecast to hold 75% of the total cellphone IC market in 2014. This would equate to a $41.6 billion smartphone IC market and represent a strong 20% 2010-2014 CAGR. In contrast, the 2014 basic cellphone IC market ($1.6 billion) is expected to be essentially only half of what it was in 2010 ($3.0 billion).

Details and forecasts of the critical electronic systems driving the IC market (including smartphones, tablet PCs, automotive, 3D TV, wireless networking, and more) can be found in the new 2011 edition of IC Insights’ IC Market Drivers—A Study of Emerging and Major End-Use Applications Fueling Demand for Integrated Circuits (to be released in November of 2010). The report examines the leading applications for ICs and evaluates the potential growth for new applications that are expected to fuel the market for ICs through 2014. New for 2011: IC Market Drivers Update with final 2010 statistics and revised forecast data (released in 2Q11). For more information, contact Bill McClean, president, IC Insights Inc., at [email protected] or visit www.icinsights.com

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