Application processors face falling unit prices

Although application processors are increasingly important enablers of multimedia capabilities in high-end smartphones and feature phones, this market will face challenges over the next several years, according to ABI Research. The company expects that, from 2007 to 2012, dropping unit prices will offset strong unit growth, according to ABI 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,” he says.

Obstacles to application-processor-unit shipment growth include integration and the emergence of ultralow-cost handsets.

ABI Research estimates that application-processor revenue will reach nearly $2.8 billion by 2012, with unit shipments of 553 million at a cost of $5.04 per unit. Despite an expected decline in smartphone revenue from $3.3 billion in 2007 to $2.1 billion in 2012, the company projects that the smartphone segment will be the largest market for application-processor-unit shipments in the five-year period. High-end feature-phone unit shipments are expected to increase by 42%, and revenue will rise by almost 21%, McEuen says.