As the wireless handset market surpasses 1 billion units shipped per year, application processors are an increasingly important enabler of multimedia capabilities in high-end smartphones and feature phones.  However, according to a recent study from ABI Research, this growing market will face several key challenges over the next several years.

“Over the course of our forecast period, from 2007 to 2012, strong unit growth is expected to be offset by dropping unit prices,” says ABI Research senior analyst Doug McEuen. “After significant increases during the next two years, the decline in unit prices will compress the application processor revenue to a flat growth rate.”

In later stages of market development, application processor unit shipment growth is expected to decrease due to two key factors: integration, and the rise of the ULCH (Ultra Low-Cost Handset) market. Integration impacts the market negatively, as multimedia functions are combined into the baseband processors, fabricated using 65nm or 45nm process technology. Low-cost handsets, which will not require an additional application processor given their limited multimedia functionality, likely will increase market share within the overall wireless device market – further contributing to the decrease in application processor unit growth.

In 2012, application processor revenue is expected to reach nearly $2.8 billion, with unit shipments of 553 million, at a cost of $5.04 per unit.

ABI Research notes that over the next several years, the smartphone segment will be the largest market for application processor unit shipments. Although smartphone revenue will decrease from $3.3 billion in 2007 to $2.1 billion in 2012, it will continue to dominate the market.

“One device with the strongest growth over the same forecast period is the high-end feature phone, or enhanced phone, as unit shipments are expected to increase by 42%,” concludes McEuen, “while revenue will rise by almost 21%.”

Application Processors in Mobile Devices presents an in-depth exploration of application processor technology and the requirements for competitive architectures, including essential product capabilities. The report discusses short- and long-term market implications, and includes key vendor profiles. It concludes with an extensive market forecast, using empirical data to track both positive and negative market forces. It forms part of two ABI Research Services: Mobile Devices and Wireless Semiconductors.

ABI Research is a leading market research firm focused on the impact of emerging technologies on global consumer and business markets. Utilizing a unique blend of market intelligence, primary research, and expert assessment from its worldwide team of industry analysts, ABI Research assists hundreds of clients each year with their strategic growth initiatives. For information, visit www.abiresearch.com, or call +1.516.624.2500.