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Slowing phone market to top 700 million in 2005

Market research company IC Insights says that after a huge increase in 2004, cell phone sales growth will slow to only 5% this year.

Cell phone unit sales are set to break through the 700 million mark in 2005, but the market will grow at a much slower rate than the past two years.

That's the conclusion of a report from IC Insights, a market research firm based in Scottsdale, AZ.

Cell phones are the single biggest application area for both GaAs IC devices and LEDs, with keypad and display backlights representing around half of the global HB-LED market.

Last year saw the fastest market growth in unit sales of cell phones since 2000. According to the report, total shipments rose 29% in 2004 to reach 670 million.

Growth in 2005 will be much slower, with the market expanding 5% and 705 million phones being sold, IC Insights predicted.

However, the company's long-term forecast is healthier, with the rate of growth expected to increase every year through 2008.

As a result, 2008 will see shipments of more than one billion handsets, it says.

The replacement market will become increasingly important in the future, and handset makers will need to convince subscribers to invest in the latest technology with new features. While 63% of phones sold in 2004 were replacements, this figure is expected to rise to 81% in 2008.

Camera phones have driven the replacement market in the past couple of years, reviving the overall sector after it suffered its only yearly decline back in 2001. Since then, the number of phones sold has doubled.

IC Insights fully expects that consumers will continue to be won over by new technologies and functions, and predicts that the average time before a cell phone is replaced will drop to just 30 months in 2008.

The market's compound annual growth rate - in terms of units sold - will be 16% over the 2001-2008 period, it concluded.

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