• by Aaron Baar , February 9, 2009

This year is definitely going to be a tough one for the cell phone industry. With cell phones having reached a saturation point in the U.S. market, declining consumer spending and a lack of must-have new features could add up to the industry's worst year ever.

"People have been replacing their old phones steadily for the past few years, but as the economy goes down, they're not spending as much," Allen Nogee, a principal analyst at In-Stat, tells Marketing Daily. Moreover, he says, the cell phone industry may have reached its apex when it comes to adding new features, which had been a prime selling strategy for cell phone makers and service providers.

"We've also hit a point where there aren't any new features left," he says, noting that most cell phones now have a camera, are Web-enabled and work on 3G networks. "There's not much more you can do in terms of user interface anymore."

Globally, more than 1.2 billion cell phones were shipped last year, according to In-Stat. For 2009, however, Nogee estimated shipments to be around 900 million, reflecting a global decline in spending. Similarly, Nokia--the world's top handset seller--in December said it expects the global handset sales to decline by at least 5% this year.

"The current economic slowdown is more widespread and deeper than ever experienced during the cell phone's lifetime, and has spread through Europe, Asia and North America," Nogee says. "Up until this point, [markets such as] Africa, India and China were growing rapidly."

Of course, what's bad for the industry might be good for consumers. With sales expected to slow down, prices may also drop. "With a lack of new features, the only thing that can change is the price coming down," Nogee says.