Henderson Forecast: 2009 Was Perfect Storm for Communications Equipment

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LOS ALTOS, CA — Slumping mobile phone sales, excess network capacity and the protracted death of traditional telecom technology have greatly undercut the demand for communication equipment this year, according to the Henderson Ventures Forecast Summary. Heated price competition in both the handset and network equipment sectors has amplified the downturn. Much of the price pressure has come from two upstart Chinese equipment manufacturers: Huawei and ZTE, which collected substantial market share during the last few years.

Figure 1. Global communications market: dollar growth rates at 2008 exchange.

Although Huawei and ZTE’s combined capture rate is far from dominant, the price pressure exerted by these low-cost producers adversely impacted production values in the advanced economies of the world. That is, while world production of communication equipment is forecast to fall 10.5% this year, North America is predicted to be down 15.8%, while West Europe loses 16.1% and Japan suffers an 18.3% decline. China will incur the smallest decline; a 6.9% retreat is predicted for 2009.

Figure 2. Growth in handsets shipments.

Pinched pocketbooks during the recession have hurt the mobile telephone industry. But one area has prospered: smart phones, including the iconic iPhone from Apple. In reality, smart phones are handheld computers with a mobile communication capability. But as the global economy improves, there will be burgeoning demand for new services, including higher fidelity mobile video; Internet protocol television (IPTV) is a notable example. Faster broadband speeds will be required to provide content of acceptable quality. So-called fourth-generation (4G) networks will be required.

Figure 3. Handset shipments in millions.

Read more 2009 analysis and short- and long-term predictions for the industry in the Analyst Viewpoints section of SMT's Website.

Figure 4. Communications equipment shipments, moving average growth.

The Henderson Forecast Summary is provided free of charge as an industry service by Henderson Ventures, publishers of the Henderson Electronic Market Forecast newsletter. For more information, visit http://www.hendersonventures.com.

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