That Apple will release a new phone or phones later this year has become a foregone conclusion -- it has to, according to Carolina Milanesi, research director at Gartner. Speculation is that a new phone, or phones, will feature a better screen, more storage, improved camera and a faster Internet connection -- features that are already available with competing products. But Apple is not about imitating anyone else, so the hope is that it is going to take a step forward, Milanesi said.
However, if Apple wants to attract buyers who just want to buy a phone -- as opposed to those who were waiting for the iPhone -- it also has to take a look at the current contracts operators are offering. For example, more flexibility for consumers who want to use the phone as a music player, and don't need the biggest data packages, would be a step in the right direction, according to Milanesi.
Even if it brings out a phone with an improved hardware spec it won't let itself get caught up in, for example, the camera megapixel race, according to Collins. The iPhone will increasingly be about what it does as opposed to what it is, he said. Apple boasting about 1 billion downloads from the App Store, and 25,000 available applications, is a good example of that.
But Apple isn't the only company focusing on software. Operators and competing phone vendors are focusing more on software and services in what has become one of the big trends this year, witnessed by the introduction of a number of application stores, and we'll see more and more of that, according to Milanesi.
For instance, in some countries, Nokia is selling the 5800 XpressMusic phone using its Comes With Music service and not focusing on the fact that it's the company's first touch device. It is also gearing up to launch its OVI store, and earlier this week it said it will work closer with third-party developers.
The 5800, which Nokia sold 2.6 million units of, was one of the highlights in an otherwise dismal quarter. Nokia still sells more than twice as many phones as Samsung, but Nokia had a bigger sales drop than its Korean competitor.
Samsung had, just like LG, a pretty good quarter. It sold 46 million phones, which was just 1 percent lower than what the company sold a year ago.
But the move to a more software- and services-oriented mobile-phone market can prove to be a challenge for Samsung and LG, because they're pure hardware companies, according to Milanesi. At the moment, they're lucky because the shift from hardware to services and software has so far only affected the high end of the market. "It might not become an immediate problem, but it's something they have to think about," said Milanesi.
Samsung has already started to dip into that market with the introduction of a movie download service in the United Kingdom, according to Milanesi.
During the rest of the year, the market will be more and more cutthroat because everyone is feeling the pinch, according to Infonetics' Webb, and there are more competitors coming into the mobile phone space, he said.
The biggest one is the Google-backed Android platform, which is slowly starting to pick up speed. Samsung this week introduced its first model, the I7500, which will go on sale in Europe in June.
"Android is not a perfect platform, and one shouldn't expect it to be. But you can guarantee one thing: It will get better," said Webb.