Although cellular handset accessories such as chargers and batteries ship far more units in what is today a $58 billion industry, memory cards provide the greatest revenue of all mobile phone add-ons, according to a new study from ABI Research.

“Of all accessories, memory cards deliver the best revenue return. In fact, as production has outstripped demand the market is currently oversupplied, leading to a 60% year-over-year fall in per-Megabyte prices. However, the memory capacity of the cards being sold is always increasing, and the resulting higher Megabyte volumes more than offset the decline in ASP,” said analyst Michael Morgan from ABI.

Driven by the photo, audio and video demands of media-centric handsets and smartphones, these memory cards, largely from third-party suppliers such as SanDisk, will see a 17% compound annual growth rate in shipments over the years to 2013.

Handset makers have been putting inexpensive low-capacity cards into smartphone and media phone boxes for some time. However, notes Morgan, there is currently a point of friction between handset vendors and carriers: the operators want all memory cards out of the box, preferring to sell higher-capacity cards separately.

“The challenge for mobile operators,” he says, “is that subsidizing handset accessories means losing some of the high margins that they earn through the sales of these products. But subsidies also mean that many more subscribers will have handset accessories such as memory cards, and will be more likely to use mobile music services or download songs, leading to higher data ARPUs for operators,” added Mr. Morgan.

Tags: SanDisk, Flash