In the mobile handset space, volume market leaders like Nokia, Samsung, LG, Motorola and Sony Ericsson are being challenged by RIM, Apple, HTC and Palm, which are significantly eroding their market share with an assault in the smartphone market.

These challengers will continue to steal market share in 2010, with figures released Wednesday predicting that the market share of the four underdogs will jump to 35 per cent of all smartphones sold in 2009 from 32 per cent in 2008 and just 24 per cent in 2007.

It’s no secret that while sales in the mobile handset space in general are in decline, the smartphone segment is actually growing and has turned into the most profitable segment of the mobile handset market. Informa Telecoms & Media forecasts that volume sales of smartphones are to grow by 33.5 per cent year on year in 2009 and by 36 per cent in 2010 to account for 27 per cent of the total number of handsets sold in 2010.

Incidentally, smartphones will also represent over half (55 per cent) of the value of the total mobile handset market and almost two thirds (64 per cent) in terms of profitability.

“As demand for mid-tier handsets declines, competition in the smartphone segment is set to intensify which is forcing manufacturers to innovate and differentiate their products in terms of hardware, software and content,” said Malik Kamal-Saadi, principal analyst at Informa.

Kamal-Saadi said that key to the success of these new entrants and smaller players is the adoption of new operating systems that have been built from scratch and better reflect the realities of modern mobile device requirements. In addition, they are not burdened with the support of a long legacy of devices and content already in market.

However, the analyst notes that the challenge for these players is to keep pace with innovation rather than getting trapped in the progressive OS upgrade cycles.

Get more information on the Future Mobile Handsets report.

“Volume market leaders have responded, with a multitude of me-too iPhones offering multi-touch and an enhanced internet experience but true innovation is still lacking from many incumbent OEMs’ portfolios,” Kamal-Saadi said. “Some players (Motorola, Sony-Ericsson, and Samsung) have responded by opting for Google’s Android as key OS to bring innovation to their smartphone portfolios.  These changes will completely transform the smartphone market landscape and could potentially lead to the emergence of new leaders in the mobile handsets market,” Kamal-Saadi added.