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By Munir Kotadia, 23 July 2003 05:30

NEWS Smartphone sales are being driven sky high as people upgrade to handsets featuring digital cameras. Sales of smartphones have increased by almost 250 per cent since last year. People have upgraded their handsets because manufacturers have found a "killer application" - the digital camera, according to research firm Canalys. Mobile phone penetration in the UK has remained steady at around 70 per cent during this period, so the increase in sales can be explained by consumers replacing their old handsets. Built-in camera functionality and falling prices are the main reasons for upgrading, according to Chris Jones, director and senior analyst at Canalys. Individuals first went out and bought the early camera phones because they caught the imagination, and they have continued to be popular ever since," said Jones, who believes Nokia got the ball rolling when it launched the 7650 last year. "The integrated camera and [organiser] functions became a reason for buying one. With the aggressive subsidies being offered, you can pick one of these up for around £100, or even less." Jones said the majority of smartphones are purchased by individuals rather then companies, but he expects this to change once usability and security issues are resolved: synchronising the latest range of devices is "difficult to set up" and requires help from the IT department. Jones also expects enterprises to spend longer evaluating the products because, unlike regular voice handsets, IT managers will have to be involved in the decision-making process. "IT managers may be waiting for version two or three of the OS before they make an investment in this space," he said. Between April and June 2002, just over 500,000 units were shipped. In the same period this year, the figure was closer to 1.7 million units, an increase of 239 per cent. Unsurprisingly, Nokia remains the leading handset manufacturer, with a 78 per cent share of the simple voice-centric handset market, with Sony Ericsson in second place (15 per cent) and Microsoft in third with five per cent share for its SPV device. For the entire smart-device market, which includes PDAs with voice functionality, Nokia took a 49 per cent share while Palm came in second with 12 per cent, and Sony Ericsson third with 10 per cent. Munir Kotadia writes for ZDNet UK