New research claims that the current economic slowdown will take its toll on worldwide shipment of mobile phones, although smartphones are expected to fare much better than basic handsets.

Total mobile phone volumes will be 1.9 percent lower next year compared with this year, according to market researcher IDC, Framingham, MA. This marks the first downturn in annual shipment volumes since 2001 when shipments were down 2.3 percent.

"There's less lending going on and the component manufacturers are forced to keep a closer eye on inventory because they don't have money to float them through as they've done in the past," said IDC senior analyst Ryan Reith.

Demand from emerging markets in the past few years generated double-digit growth for mobile phone makers. But growth has slowed in these markets as they mature, with IDC expecting a 7.1 percent increase this year and negative growth in 2009.

Component suppliers, handset makers and wireless carriers told IDC that they expect the economy to affect demand for mobile phones next year.

Aside from Nokia's announced lowered expectations for sales, chipmakers such as Qualcomm, Texas Instruments and MediaTek also announced reductions in manufacturing for 2009 over market-performance uncertainty.

Up, down, up
IDC projects that U.S. smartphone sales will increase 75.7 percent this year and 3.1 percent next year, versus basic phones' negative 9.8 percent and negative 11.6 percent growth for the comparable periods.

Smartphone sales will go back up 28.2 percent in 2010, according to IDC. However, basic phone sales will drop 8.8 percent in that year as more consumers upgrade to more affordable or carrier-subsidized smartphones.

Combining smartphones and basic phones, total shipments this year will drop 0.3 percent, plunging 8.7 percent in 2009 before making a recovery to negative 0.7 percent in 2010.

Worldwide, smartphone sales are expected to grow 26.9 percent this year and 8.9 percent in 2009, versus basic phones' 4.6 percent for 2008 and negative 3.5 percent for 2009.

IDC has cut forecasts for two of the largest emerging markets for mobile phones, China and India.

Growth of mobile-phone shipments in India next year will be halved to an estimated 7 percent, from 14.5 percent this year, per IDC.

Growth of shipments in China will drop to an estimated 4 percent increase next year, from 11 percent this year.

Smartphone shipments worldwide will grow 24 percent in 2010, way ahead of the 5 percent projected for basic phones.

Overall, IDC expects total worldwide shipments of mobile phones to post a 7.1 percent increase this year, before posting a negative 1.9 percent growth in 2009. Sales are expected to be up 7.7 percent in 2010.

"Manufacturers will be down just because of the economic situation," Mr. Reith said. "But the real cutback is in the mid-range and low-range phones and not the feature or smartphones."

Another plus point in favor of smartphones is the falling prices. The price differential between smartphones and basic phones is narrowing, helped no doubt by increasing subsidies from carriers looking to recoup costs through two-year contracts and data -sage fees.

"You're basically going to see devices on the high end come down because of increased subsidy from the operator," Mr. Reith said.

"The reason is these devices carry a higher data-attach rate, meaning more people who purchase these phones also purchase a data plan," he said.

Hold on, catch up
A consequence of this weak economy is the expectation that consumers may hang on to their existing phones when their contracts are up next year.

That's not necessarily a bad thing for smartphones or for marketers and content owners looking to run advertising next to content on Web-enabled smartphones.

"If people are still holding on to their devices, it's not a bad thing, because you know where to find things," said Ramon Llamas, senior analyst for mobile devices technology and trends at IDC.

"There's a sense of familiarity with it," he said. "You're accustomed to searching for a piece of information [on the existing phone]. You can navigate towards it much faster."

A major benefit of the slowdown is the breathing space it may give application developers and content owners to catch up with the slew of new devices on the market, including those with touch screen, GPS, maps, games and social networking widgets.

"It becomes a matter of future-proofing," Mr. Llamas said. "It's a way to take a look at the disruptive technologies that are out there and develop content that incorporates it, so that when the market picks back up, content developers are ready to pounce at the opportunity.

"You can take a look at the models out there -- SMS and MMS," he said. "That's not going away. And that's also a good thing, because it allows content developers to exploit the current market opportunities."

Of course, carriers wouldn't like that to happen. Not only do they cut a small cut of new device sales, they also would like to maintain good ties with the handset manufacturers.

"It helps them keep up good relationships with the manufacturer and it's easier to market new content and applications for newer devices," Mr. Reith said.