Mobile phone makers can expect another two to three more years of strong growth due to a migration to higher-speed networks before running into market saturation. Mobile handset shipments should climb until 2006, when global sales are forecast to hit 500 million units. However, that is the likely point of saturation resulting in almost zero growth afterwards, according to a recent study by Gartner Dataquest. Wireless semiconductor manufacturers must also face up to looming market maturity as the mass movement towards next-generation multimedia phones starts to wane once the worldwide upgrade to next-generation phones is complete. Upgrading network services from second-generation to higher-speed networks would be the key industry driver in the coming three years of growth in handset sales, Gartner research vice-president Stan Bruederle said. He said as global wireless carriers launched higher-speed network services, the global handset market would see increasing demand for enhanced mobile handsets. Enhanced handsets are phones that enable multimedia applications such as video screening, camera function, smart phones and mobile personal digital assistants. Last year, about 420 million mobile handsets were produced, of which about 60 per cent were 2G phones. But by 2006 onward, less than 10 per cent of production will be basic 2G models. Research house International Data Corp shares a similar view but with more aggressive projection. IDC forecast worldwide mobile handset shipment to surpass 500 million units by next year, to be boosted by strong growth in 2.5G and 3G handsets. IDC expects about 58 per cent of next year's worldwide handset sales to be next-generation handsets, compared with this year's estimated 40 per cent. Having forecast saturation in the global handset market by 2006, Mr Bruederle warned wireless semiconductor makers to be more innovative in producing higher capability chipsets embedded with application processors. Gartner projects global wireless semiconductor revenue to grow from last year's US$22 billion to US$42 billion by 2005. Mr Bruederle said: 'It is a fairly big market growing at 11 to 12 per cent a year, but it is not big enough to support 12 companies.' He said competition in the handset semiconductor market was intense with the world's top few players fighting to be the market leaders.