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Smartphone handset market share continues to grow: NPD Group

When it comes to sales of mobile phones in the United States, feature phones still rule the market, even as smartphone sales continue to increase their share of overall handset sales, according to market research company the NPD Group.

NPD's Mobile Phone Track study reveals that unit-sales of new feature phones fell 5 percentage points to 72 percent of new handset sales in the second quarter, while sales of new smartphones -- handsets with their own operating systems -- reached 28 percent of overall consumer purchases, a 47 percent increase in the category's share since last year.

"We continue to see strong growth in smartphones in the U.S.," said Ross Rubin, director of industry analysis at the NPD Group, New York. "Despite the depressed economy, consumers are continuing to invest not only in the handsets themselves, but in pricy data plans.

"We saw the iPhone retake the lead as the best-selling handset in the U.S., overtaking the BlackBerry Curve, which had been No. 1 last quarter thanks to a buy-one-get-one free promotion," he said.

"The iPhone 3G outsold the 3GS -- the 3GS is more advanced, but clearly the $99 price point for the 3G is appealing and expanding the iPhone customer base."

The NPD Group is a provider of consumer and retail information for a wide range of industries, with a client list of more than 1,700 manufacturers, retailers and service companies.

NPD's study found that overall handset sales volume in the U.S. grew 14 percent year-over-year in the second quarter, as sales revenue increased 18 percent.

The average selling price of all mobile phones increased 4 percent year-over-year, reaching $87 in the second quarter.

NPD's second quarter ranking of handsets showed the LG enV2 and Samsung Rant led feature phone sales, while Apple iPhone 3G and RIM Blackberry Curve were the top-selling smartphones.

"Coming down to that $99 price, the iPhone has really shifted and affected the price advantage that a number of the advanced feature phones have had," Mr. Rubin said. "There are still a huge percentage of devices that have sold below that $99 price point.

"The role that the feature phone plays is catering to a consumer that doesn't want a full-data plan, but who may be interested in some texting or instant messaging, music or camera features," he said. "Feature phones can meet those needs adequately and customers continue to buy them."

Wi-Fi capability increased three-fold since last year, with 20 percent of all new handsets equipped with this capability.

Touchscreens on both feature phones and smartphones have also seen tremendous growth since last year, with 26 percent of all new handsets bought in the second quarter including this feature.

Physical QWERTY keyboards, by comparison, were available in 35 percent of handsets sold.

Feature phones are taking on more of the physical characteristics of smartphones, and often offer greater exposure to carrier services, according to NPD. Although their user interfaces continue to improve, the depth of their applications generally lags behind those of smartphones.

"Internet access continues to be a strong driver for smartphones, with advanced browsers that can more faithfully reproduce the desktop Web experience," Mr. Rubin said. "Smartphones continue to improve, but the feature phone experience is simpler."

With the price gap between smartphones and feature phones narrowing, to remain competitive feature phones need to develop a better Web experience, drive utility via widgets and sidestep the applications arms race, according to NPD.

"Marketers face the challenge of having to support multiple experiences," Mr. Rubin said. "You want a sort of lower-function application as a means of reaching the feature phone user that will work with a Java browser or Brew application, but once you get to the smartphones, it's challenging because they all have different operating systems.

"More of the advanced feature phones provide a basic level of Web access, but without some advanced media applications such as Flash, what kind of engaging experience can be created on the phone?" he said.

"That's why we continue to see reliance on SMS short codes to complement campaigns that are taking place in other media."