The total of 256.6 million phones shipped in the first quarter was 35 million less than a year ago, ABI Research disclosed Thursday. "The industry and consumers have gone into protection mode," said ABI Research Practice Director Kevin Burden in a statement. Manufacturers are trying to protect profits by producing fewer phones while consumers are delaying upgrading their devices until they are more confident about the future.

Worldwide, Latin America was the hardest-hit, with a 28% drop in shipments, while the Asia/Pacific region suffered the smallest decline in shipments, at 8%. So far, smartphones have bucked the downward trend. In a May report, Gartner estimated that smartphone unit sales increased 12.7% from a year ago, even as total mobile phone sales globally dropped 8.6%.

The recent release of the Palm Pre, the new iPhone 3GS and $99 iPhone 3G -- along with other new smartphones expected to roll out this summer -- could help keep that trend going. Sprint has already said the Pre, which it released last Saturday, broke first-day and first-weekend sales records for a Sprint device.

At the other end of the spectrum, Juniper Research expects sales of low-cost phones to ramp up over the next five years, with 80% of new mobile users coming from emerging markets. In a report issued this week, the market research firm predicts annual sales of inexpensive handsets to grow by 22% to more than 700 million between 2009 and 2014.

The report found that efforts by wireless companies to lower the total cost of ownership for devices and services to less than $5 are already reaping benefits in countries such as Bangladesh, Pakistan and India. At the same time, players such as Nokia are developing content-driven services to encourage first-time mobile users to continue using their devices and improving their standard of living.

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