Gadget-Hungry Asia to Lead Demand for Smartphones

By Jennifer Tan

SINGAPORE (Reuters) – Hoang Anh Tuan, a self-confessed “handphone freak” in Vietnam, calls his Sony Ericsson (news – web sites) smartphone his pride and joy.

The 28-year-old organizes his schedule, reads Word documents and views emails using his P900 mobile, which combines phone functions with features similar to those of a personal digital assistant (PDA).

“I can’t live without technology,” said the producer for a television station. “I love using high-tech applications in my phone, and this phone has been indispensable to my work.”

Early technology adopters like Hoang have boosted sales of smartphones across Asia and are driving expectations that the region’s demand for the pricey devices will outpace that of Europe and the United States over the next few years, analysts said.

The trend is being watched closely by phone makers such as the joint venture between Sony Corporation . and Ericsson because smartphones carry higher profit margins.

Strong sales of the Treo 600 smartphone helped U.S. handheld computer maker palmOne Inc. post a quarterly profit last month that was more than twice Wall Street estimates.

The uptake of smartphones is also key for telecoms operators looking to raise revenues from data services, such as mobile Internet and email, as voice tariffs fall under competitive pressure.

According to Strategy Analytics, Asia Pacific will buy a third of all smartphones in 2004, outstripping North America’s 27 percent share of sales and Western Europe’s 28 percent.

By 2008, Asia’s share of smartphone sales is expected to rise to 36 percent, far exceeding the 23 percent expected for North America and 24 percent in Western Europe.

DISPOSABLE INCOME

“The percentage of disposable income that is spent on mobile devices in these markets is much higher than in Western Europe and the U.S.,” said Strategy analyst Neil Mawston.

That’s certainly true of Hoang, who changes handsets every six months. He said he is willing to shell out at least US$300 to US$400 for a new phone, almost half his monthly income.

South Korea and Japan will lead demand in Asia, Mawston added. “Users are keen on the latest gadgets and more willing to spend on premium business-centric devices,” he said.

So far, smartphones have been a niche market. A total of 11.2 million phones shipped worldwide in 2003, just 2.1 percent of total handphone sales. But the figure is seen growing to 109.9 million units by 2008, about 14 percent of the total, data from Strategy showed.

Nokia, the world’s biggest mobile phone maker, said smartphone demand in Asia was “very promising.”

“There continues to be an accelerating trend because the Internet penetration has not been that high in many parts of Asia, and people are getting acquainted with the Internet over the mobile device instead,” Nokia Executive Vice President Anssi Vanjoki told Reuters.

The Finnish firm has forecast that the industry would ship 20 million smartphones globally this year, almost double last year’s sales.

Motorola Inc., the second-largest phone maker, also expects Asia to adopt smartphones more aggressively.

“Consumers in the region are more ready to adopt the latest and greatest as there’s a more experimental mindset,” Scott Durchslag, Motorola’s corporate vice president, told Reuters.

“There’s also the prestige factor in owning the latest gadget with the most powerful set of features.”

Businesses in Asia are also expected to introduce smartphones into the workplace faster because it will be easier for them to adapt their computer infrastructure to provide wireless data services to employees.

“A lot of Asian companies started deploying IT (information technology) later so they have fewer legacy architectures to contend with,” Durchslag said.

“For example, a bank in the U.S. would have systems cobbled together over decades, and would face heavy integration costs, but for an Asian bank, it would be cheaper and faster to put a mobile platform under their infrastructure.”