Market Intelligence Center (MIC) reports that total handset sales in the Taiwanese market rose close to 1.6 million in the second quarter of 2005, representing a year-on-year growth rate of 5%. With the rollout of many new mid-range and high-end handset models, ASP (Average Selling Price) increased by 3% year-on-year, and total sales value rose by 8% to reach NT$10.5 billion (US$331.9 million; US$1 = NT$31.64).
The second quarter is traditionally the slack season in the handset market. However, the second quarter of 2005 saw both mobile phone operators and handset vendors launching mid-range and high-end handsets that support multimedia applications, in preparation for the rollout of 3G services in the second half of the year. The introduction of these new handset models is partly in response to rising handset replacement demand in the Taiwanese market, while by subsidizing the price of the new handsets, the mobile operators also hope to encourage upgrades to higher charge rate plans and subscription to data services. At the same time, Taiwanese handset channel players have been aggressively promoting mid-range and high-end multimedia handsets, while slashing prices to clear their inventory of entry-level 2G handsets.
As handset vendors expand their mid-range and high-end product lines, the share of total handset sales value held by models in the NT$7,000 (US$221) to NT$15,000 (US$474) price band has risen to over 30%, around 10 percentage points up from the second quarter of 2004; total shipment volume for handsets in this price band has increased by approximately 44% over the same period. With handset vendors adding 300,000-pixel and 1MP (Megapixel) camera modules to their new mid-range and high-end models, the share of handsets sold that are equipped with a camera capability has risen to over 50%, representing a two-fold year-on-year increase compared to the second quarter of 2004.
Looking ahead to the third quarter of 2005, summer vacation is expected to drive an increase in demand for handsets. With the rollout of 3G service scheduled for the second half of 2005, operators will begin introducing new value-added audio and video services, including MP3 music downloading, streaming video, video telephony, and e-wallet service. Given the popularity of MP3 players, it is anticipated that MP3 music downloading will be the hottest value-added service in the second half of the year. Handset vendors are already preparing to add new MP3 capable models to their mid-range and high-end product lines, partly to support mobile operators' music downloading services, but also in anticipation of the replacement demand that the MP3 boom will stimulate demand in the market.
Camera modules are now already a must-have feature for mid-range and high-end handsets; the second half of 2005 will see handset vendors rolling out more models featuring 1MP camera modules. With the launch of new services and the introduction of new multimedia handset models, it is anticipated that quarterly handset sales in the Taiwan handset market will exceed 1.8 million units in the third quarter of 2005, representing year-on-year growth of 4%. Total sales for the whole of 2005 are expected to reach over 6.7 million, 4% up on 2004.
The advantages of first-tier handset vendors in brand recognition, product strategies, and marketing resources are expected to exert pressure on second-tier brands' market share. Faced with the need to reduce distribution and maintenance costs, Synnex and Seano, Taiwan's leading handset distributors, have announced that they will no longer be distributing private label handsets. This is projected to accelerate second-tier brands' withdrawal from the Taiwanese market, causing the level of concentration in the market to rise still further.
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Market Intelligence Center, based in Taipei, Taiwan, was founded in 1987. MIC is Taiwan's premier IT industry research and consulting firm providing intelligence, in-depth analysis, and strategic consulting services on global IT product and technology trends, focusing on markets and industries in Asia-Pacific. MIC is part of the Institute for Information Industry. https://mic.iii.org.tw/english