Analyst Finds 150 Million “Missing” Handsets

[qi:gigaom_icon_mobile] The Linley Group released a report last night in which it claims that about 150 million handsets are missing from the official calculations of phones sold in 2008. The research firm notes that while some 1.2 billion cell phones shipped last year, 1.43 billion cellular baseband chips shipped, too, almost all destined for handsets. After accounting for waste and non-handset devices such as modems, analyst Bob Linley Gwennap guesses that 1.36 billion handsets were actually sold, while the missing chips were put into some 150 million unlicensed phones produced in China. From the report:

We believe that most handset-market estimates are missing the large number of unlicensed handsets produced in China. These “shanzhai” phones are produced by many small suppliers, some even operating out of apartments. This market is largely supplied by MediaTek, which provides complete handset chip sets and reference designs to the shanzhai vendors.

As the “shanzhai” market grows (Linley estimates it consisted of a mere 20 million units in 2005), MediaTek is taking market share away from the top five handset vendors: Nokia, (s nok) Samsung, LG, Motorola, (s mot) and Sony-Ericsson (s sne) (s ericy).  For 2008, Linley estimates that  71 percent of handsets sold came from the top five vendors, 18 percent came from second- and third-tier manufacturers, and 11 percent from the shanzhai makers. The research firm forecasts future shanzhai growth of 8 percent each year through 2013.
The bottom line is that Linley believes a total of 1.41 billion cellular devices shipped in 2008. Thanks to anticipated growth in the shanzhai market, a need to restock inventories and better economic condition, the firm estimates that despite the down handset market, baseband chip sales from vendors such as Qualcomm, (s qcom) MediaTek and Infineon will only decline by 2.5 percent in the second half of the year.
The news for the handset makers, however, isn’t quite so rosy. With competition on both the low and high end, phone makers such as Nokia, Sony-Ericsson and Motorola are getting squeezed. The pressure for industry consolidation appears to be growing.