Greater China's VoIP phone manufacturing base, comprising mainland China, Taiwan and Hong Kong, is growing at a brisk pace to match the strong worldwide demand. The region's 600-strong supplier base is forecast to continue expanding as more newcomers join the line. This will not only increase production and export volumes, but also bolster product development.

In 2007, the projected combined output of the surveyed makers in this report is about 34.98 million units, representing a growth of 31 percent from their aggregate output of 26.68 million units in 2006. Their projected combined export volume for 2007 is at least 27.03 million units, equivalent to 77 percent of the forecast production volume for the same year. This will mean a 24 percent growth from 21.80 million units of VoIP phones shipped in 2006.

Strong emphasis on R&D has resulted in new applications, in the form of more telephony programs and protocols supported, and enhanced product usability. Whereas earlier-generation products supported only Skype, newer models can run a host of other VoIP programs and protocols. VoIP phones now also combine mobile and entertainment functions such as MP3/MP4 playback, and even GPS tracking. Some models enable videoconferencing.

Supply of Skype phones will continue rising, boosted by the popularity of Skype and the phones' easy-to-use interface. Although supply of USB phones will remain strong, standalone phones are projected to dominate the mainstream in the next few years. Combination USB and standalone phones are seen as transitional products bridging the gap from USB to standalone applications.

The growing adoption of Skype and similar telephony programs, supported by broadband networks worldwide, will prompt more makers to spice up the product line, prioritize R&D and boost exports. Makers are integrating wireless technologies, such as Wi-Fi and Bluetooth, into an increasing number of products. However, it will take a couple more years before Wi-Fi VoIP phones breach the mainstream due to the high investment costs. The convergence trend will speed up the rollout of new VoIP phones with multimedia and mobile entertainment capabilities. SIP will be the prevailing protocol in 2007, although some makers will also use H.323, MGCP and IAX2. Prices will drop in the coming months as supply grows and chipset costs drop.