Follow The Chips
By Carlo Longino, Wed Jun 08 17:45:00 GMT 2005

A major supplier of chips for mobile handset vendors revises its sales forecast, boding well for device sales.

Om Malik is a firm believer in following the money to see business trends, and he's extended that to a mantra to follow the chips -- understanding that chipmakers' estimates and results lead many technology markets by four to six months. His latest observation makes note of Texas Instruments' new guidance, saying its second-quarter sales might reach its highest forecasts.

TI's chips powered more than half the mobile phones sold around the world last year, so when it says it's seeing booming demand for chips for handsets with advanced features, it signals that the third, and particularly fourth, should be very strong for handset sales. At least one market researcher appears to agree -- Gartner in May raised its full-year sales estimate from 720 million handsets to 750 million.

Gartner and other market researchers continue to point to emerging markets as the key driver of handset sales. While in many of these areas, low-cost, high-volume devices are boosting sales, other emerging markets are maturing quickly -- like in China, where consumers are upgrading their handsets to the latest high-end Western models.

So while carriers try to push the cost of entry-level models ever lower, they also need to recognize these markets can mature much more quickly than those of Western Europe or North America, and adjust their product mix and distribution accordingly to take advantage of demand for more advanced devices. Technology is moving at a much faster pace these days, with carriers in emerging markets talking about deploying the same high-speed, next-generation networks as those in established ones.

Emerging markets and advanced devices aren't mutually exclusive, as reading analyst reports and TI's updated outlook separately might lead one to believe. The upgrade cycle that some see ending in Europe may just be shifting continents.