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cellphoneprofitsApple’s iPhone and Research in Motion’s Blackberry are on track to make up more than half of the mobile phone industry’s profits this year, according to Deutsche Bank.

The two companies may contribute 58 percent of the industry’s operating profits this year even though their handsets only account for 5 percent of the market, predicted Deutsche analyst Brian Modoff in The Wall Street Journal.

Last year the two companies captured 3 percent of the market, but accounted for 35 percent of industry profits. Carrier subsidies are fueling the revenue growth for the two companies, because they make it more affordable for consumers to make the leap to smartphones. Basic phones are scarcely profitable for mobile phone companies without scale, Modoff added.

While almost every other growth industry moves towards greater product diversity and wider consumer choice, the mobile business appears to be shifting in the opposite direction, with companies under pressure to deliver a single ‘iPhone-killer’.

Faced with a slowing economy and the emergence of a new category of app-centric ‘blockbuster’ devices from the likes of Apple, RIM and HTC, traditional manufacturers are reducing the number of handsets in development or re-directing resources to individual products in the hope of achieving a one-off success.

Motorola, once the second largest manufacturer in the world, and Sony Ericsson are among the device makers moving away from their previous strategy of expanding sales into the mid- and low-range markets, choosing instead to retrench to the top tier.

This trend was one of the issues debated at a panel called “Finding a role in the new world order. Battle for the mobile ecosystem.” at our MobileBeat 2009 conference last week.

Matthaus Krzykowski contributed to this article.


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