Smartphones Set to Overtake Feature Phones in Flash Memory Consumption Next Year

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Note -- this news article is more than a year old.

In another sign of their rising clout in the supply chain smartphones next year will account for a larger share of NAND flash memory usage than feature phones the first time this has ever happened.

Approximately 792 million flash memory units, including both NOR and NAND varieties, will ship in 2013 to smartphones, compared to 703 million units for feature phones, according to IHS iSuppli. This compares to a total of 790 million units this year for feature phones, and 613 million units for smartphones.

That means that between 2012 and 2013 there will be a 29 percent growth in flash memory shipments for smartphones, versus an 11 percent decline for feature phones.

"Because feature phones this year will remain the largest segment of the global mobile handset market, they will continue to consume the largest amount of flash memory of any single type of phone," said Ryan Chien, analyst for memory & storage at IHS. "However, a permanent reversal will ensue next year as smartphones overtake feature phones in total units and flash memory shipments. This illustrates the rising influence of smartphones within technology markets."

Feature Phones Remain Relevant

Despite their anticipated loss of market leadership, feature phones will continue to make up a substantial portion of flash memory shipments in the years ahead, accounting for well over 500 million units each year through 2016.

Overall, flash memory densities continue to rise as bit costs erode and as feature phones grow in sophistication to meet the changing needs of consumers, especially in the emerging markets of the developing world where consumers are becoming increasingly mobile-centric. High-density NOR remains common in feature phones because of its superior speed for code execution, while NAND densities of 128 megabytes can now be found in mainstream feature handsets in order to handle applications and media storage.

The continued high usage of flash memory in feature phones is due to various factors. For instance, superior cameras of 2 to 3 megapixels are now common in the handsets, with more than 400 million feature phones shipping with such cameras this year. Also playing a factor is the increased utilization of feature phones as portable music players -- a functionality that encourages higher storage densities. A third driver is the penetration of wireless 3G into feature phones, facilitating more frequent usage of apps in the handsets.

The Feature Upsell

Feature phones can become a good opportunity for handset brands to establish customer loyalty for future upselling, especially in areas like Latin America, the Middle East and Africa, and parts of Asia -- where handsets are still making their way into the local population, and where cellphone usage growth is much higher than in the mature markets of North America and Europe.

An upselling strategy could well benefit entities like Nokia and Research In Motion -- two handset makers that have stumbled in the smartphone space in the developed world, but maintain strong presence in many emerging countries. While products from both companies have lost their luster in the high-end handset spectrum, the historical success of the two firms could position them for continued popularity in the emerging markets via the future products they release, especially as consumers there enjoy increased purchasing power over time.

Nokia, in particular, is well-suited for developing markets: its phone prices have dropped 50 percent since 2007, during which time Samsung's prices jumped by nearly the same margin of 50 percent.

All told, feature phones remain a critical segment to meet the needs of a fast-growing and potentially lucrative demographic in many areas of the world, which should benefit the flash memory market, IHS iSuppli believes. This is true despite projections for smartphone shipments shooting through the roof.

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