Handset Shipments To Carriers To Grow 1.4% In 2001: IDC

FRAMINGHAM, MASS.— Wireless handset shipments to carriers will flatten out in 2001, growing only 1.4 percent to 71.2 million compared to last year's 56 percent gain to 70.1 million, in large part because of excess carrier inventories, according to IDC.

Carriers are still working off inventories that they began building early last year as a hedge against component shortages, which they feared would lead to tight supplies, said senior analyst Weili Su.

In 2002, IDC projects manufacturer shipments rising in the U.S. by 6.9 percent to 76.1 million. In 2005, sales will hit 110.8 million units, representing a compound annual growth rate of 9.6 percent between 2000 and 2005, she said.

Also contributing to slower U.S. handset growth are the "recession" in the IT industry and slower net-new subscriber growth as a result of deepening U.S, penetration, she noted. Most of the slowdown, however, is due to excess carrier inventories, she added.

Worldwide wireless handset sales will also grow slowly in 2001, rising only 3 percent to 412 million units, but the industry will nonetheless enjoy a 10.9 percent compound annual growth rate between 2000 and 2005, an IDC study said. Sales will hit 672 million in 2005.

The company blamed the economy and lagging 2.5 and 3G network rollouts. "With an IT recession in the United States and deteriorating conditions in Europe and Asia, handset manufacturers and wireless carriers will be faced with slumping consumer demand despite any new services they may roll out over the next year," said VP Randy Giusto.

Increasingly, the company said, "the prospect of a recovering handset business will be dependent on the replacement market. However, given the recent delays and postponements in next-generation network deployments in each region [of the world], the replacement market will likely suffer from a weak 2.5G and 3G handset offering associated with the timing of network rollouts. As evidenced by the delay of GPRS handsets, handset manufacturers are now acutely aware of, and just coming to grips with, the technical difficulties that need to be tackled in order to offer the capabilities promised by 2.5G/3G services."

In the long run, however, "the advent of 2.5G and 3G will undoubtedly be the engine driving handset growth," the company said.