Phone, Camera Combo Sales Developing

What do you get when you cross a camera with a mobile phone? Another must-have personal electronic device, according to forecasts from Strategy Analytics. The research firm predicts that 16 million camera phones will be sold worldwide in 2002, with growth surging to 147 million in 2007.

Research from Strategy Analytics revealed that 20 percent of the cellular handsets sold in 2007 will contain an embedded camera, but high prices and relatively large form factors will inhibit initial diffusion of camera phones in Western Europe. Interim solutions, such as expansion camera modules and camera PDAs, will satisfy current niche demand, but will only account for 6 percent of global PDA sales in 2007.

Chris Ambrosio, director, Strategy Analytics Global Wireless Practice, comments, “Camera phones outside Japan and Korea will remain high-cost, moderate volume products through 2003. Stronger volume will be seen in 2004 when camera modules begin to commoditize, and when handset vendors start to reap the benefits of extensive distribution networks and subsequent economies of scale”.

Encroaching 3G technology coupled with a growing replacement rate will hopefully boost a sagging handset market. Neil Mawston, senior analyst, Strategy Analytics Global Wireless Practice, says, “Camera phones will be an essential tool in driving handset replacement rates in the next five years, especially in sluggish markets such as Western Europe.”

The Shosteck Group analyzed the replacement rate and found that the transition from analog to digital transmission peaked the rate to 36-37 percent during 1999 and 2000, but the figure dropped to 19.7 percent in 2001. Camera phones are expected to fortify handset sales as vendors look for ways to succeed in a competitive market.

The research indicates that image transmission, and most notably, image-capable handsets, will also produce greater value for network operators through the increased average revenue per user that greater functionality will generate. However, the greater value, and ensuing higher price, of image-capable handsets will have to come from more than the imaging capabilities alone. Imaging requires only a software upgrade and a minimum resolution display so vendors are going to have to focus on hardware that enhances the appeal of imaging to end-users. It is such hardware, together with imaging software, that will motivate end-users to pay mid- and high-tier prices.

Japan, an early adopter of wireless technology, already boasts millions of phone/camera combo handset owners. J-Phone, a Japanese operator that introduced “Sha-Mail” (picture messaging) services, reports that camera equipped mobile phone handsets sales exceeded five million units as of March 2002. Competing wireless operator, DoCoMo [define], countered with digital services and handsets, which include video imaging.