Worldwide sales of mobile phones declined in 2001 – for the first time in the device's history. Sales totalled 399.6 million, a drop of 3.2% from 2000, according to researchers at Gartner Dataquest. But it was not all bad news – and the rollout of new technologies promises to give fresh impetus to this faltering market.
For example, sales of handheld computers, known as personal digital assistants (PDAs), continue to grow, albeit at a slower rate than before. In 2001, the PDA market grew by 18.3%, reaching sales of 13 million units. In 2000 the growth rate had been a massive 114%.
Gartner forecasts 18% growth in the PDA market in 2002, with sales reaching 15.5 million units. As for mobile phones, growth prospects in the first six months "are not encouraging", according to senior analyst Bryan Prohm, although there are "some positive signs on the horizon." As an example he cites the sales of Ericsson's T68 mobile phone, one of the first handsets to come with a colour screen. Colour terminals, which are now being rolled out in Europe by vendors after some delays, are regarded as a catalyst for replacement sales. Prohm expects colour screens to become equally significant for the growth of the PDA market. He expects that vendors will increasingly develop more "novel, compelling mobile devices" to encourage people to change their phones.
Gartner expects the PDA market to also enjoy robust growth in 2003. But in the medium term, the PDA and mobile-phone markets will converge as advanced mobile phones, dubbed 'smartphones', gain ground.
That may not be the only change to the wireless device market. Nokia of Finland was a clear leader in 2001, according to Gartner, holding 35% of the mobile phone market. Motorola of the US held the number-two position, with a share of 14.8%. But some analysts believe that new industry leaders will emerge as phones become more sophisticated.
Take Microsoft. In April 2002, the US software giant released a wireless version of its .NET web services initiative, making it easier for developers to write Windows-based web services software for wireless devices. Microsoft also announced the launch of two new PDAs, from Toshiba and Hewlett-Packard respectively, that use its wireless operating systems. Microsoft may not have had much success getting the leading mobile phone makers to sign up to its operating systems – but it has won over several handheld computer makers. It will hope that when the PDA and mobile-phone markets merge, that it is the PDA makers that win the greatest market share.
Meanwhile, analysts predict that the current growth of wireless local area networks (W-LANs) – systems offering high-speed web access in 'hotspots' such as hotel lobbies, coffee shops and airport departure lounges – will fuel growth in the markets for devices targeted at business users, such as wireless laptops, PDAs and smartphones.
The W-LAN market is being given fresh impetus thanks to strong vendor support for 802.11b, the principle W-LAN protocol, and decreasing equipment costs, according to analysts at Frost & Sullivan. There are many beneficiaries of a growing WLAN market. These include vendors of W-LAN access points, notebooks, desktop, PDA "add-ons" and gateway devices. In 2001 the industry generated revenues of €293.3 million, a total set to increase to €1.1 billion in 2006, according to Frost & Sullivan. The main bulk of this growth is expected to come from the sale of gateway products, due to drops in the price of broadband services and the further development of the consumer market.
But Frost & Sullivan warned that end-users may become confused by a plethora of protocols and technologies, as well as "the advent of next-generation standards and the prevalence of a changing and uncertain regulatory environment." (Commercial W-LANs are not permitted in several countries in Europe – see Wireless wrangling). Security problems with W-LAN technologies may also hinder growth.