Despite soft macroeconomic conditions, the market for mobile communications equipment will grow a strong 12.6 percent when the current year finishes, propelled by the climbing shipments of mobile handsets and tablets, as well as by increased semiconductor content in those and many other devices supporting the 4G wireless standard known as Long Term Evolution (LTE), according to an IHS iSuppli Wireless Systems market tracker report from information and analytics provider IHS.
Total factory revenue from original equipment manufacturers making mobile communications equipment is projected to reach $376.0 billion by year-end, up from $333.8 billion in 2011. Next year, overall revenue for mobile communications equipment is forecast to rise to $444.2 million. Driven by mobile broadband, the five-year compound annual growth rate until 2016 will be 11.3 percent.
IHS defines mobile communications equipment factory revenue as what manufacturers earn from the sale of devices into the channel-in this case, mobile communications equipment like smartphones and other handsets. The category also includes wireless infrastructure gear such as routers.
To be sure, growth this year is less than the much more sizable expansion of 29 percent in 2011 because of a host of economic factors-including turmoil engulfing the euro zone that was not a cause last year, and a slowing China affected this time by the global turmoil.
Even so, the market's double-digit expansion in 2012 is a testament to the ongoing huge impact of cellphones and tablets on the mobile equipment market. The increasing deployment of LTE is also a considerable factor, which will continue to spur the market forward.
In particular, the increasing proportion of handsets being sold as smartphones affects semiconductor content positively. When compared with previous handset designs, for instance, smartphones carry increased costs for the applications processors, memory bits and sensors being used, favorably impacting the semiconductor suppliers providing those components. Moreover, smartphone support for the next-generation LTE wireless standard also drives semiconductor content, because more capable digital basebands, RF transceivers and power amplifiers are required.
As a result, the semiconductor market for mobile communications is set to generate $74.4 billion at the close of 2012, up 4.6 percent from $71.1 billion in 2011. While wireless semiconductor revenue has been revised down slightly from earlier estimates due to the underperforming global economy, the wireless segment as a whole remains one of the few areas in the worldwide electronics value chain to keep growing.
Among carriers, spending on wireless infrastructure gear is increasingly being funneled to LTE. Expenditures on 4G LTE will exceed $8.0 billion this year, more than double the $3.7 billion spent in 2011. And starting next year, LTE will dominate the global wireless infrastructure market over 3.5/3.75G-related investments. Moving forward, the most successful manufacturers of mobile communications equipment will be those that allow wireless carriers to cost-effectively upgrade their base stations to 4G LTE-an important determination in a tightening market.
Ecosystem relationships and expanded visibility will also continue to be keys to success. High-profile mergers and acquisitions-exemplified by the likes of Qualcomm and Atheros, Broadcom and Beceem, and MediaTek and Ralink-have become important, and the Nokia-Microsoft partnership on smartphones is also notable.
Such strategic realignments will set the stage for growth among individual entities involved in either a merger or partnership for the next three or four years, IHS iSuppli believes. And when history is reviewed in the future, 2012 will be seen as the year when such coalitions started bearing fruit.
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