Analyst firm Wireless Intelligence claims that the average margin for the top five handset makers was just 4 per cent in Q1 this year, down from 13 per cent in Q1 2008.

The company's figures cover Nokia, Samsung, Sony Ericsson, Motorola and LG, which have all recently announced their Q1 financial results.

The analyst also highlights a bigger problem for these companies, which is that R&D and marketing costs aren't falling enough to make up for the decline in margins.

In fact, Wireless Intelligence says R&D rose from 10 per cent to 12 per cent of the handset makers' revenues in the same period, while marketing costs rose from 9 per cent to 10 per cent.

The analyst's prediction is that the handset firms will try to cut costs in both areas this year, shifting more focus to higher-margin smartphones and higher-volume low-end handsets, while moving away from mid-tier phones.

The smartphone part of that is good news for mobile games companies, of course, as smartphone owners buy more games - especially when they come with a good retail experience.

"Handset vendors will have to carefully monitor price elasticity and device price erosion in 2009," says senior analyst Joss Gillet.

"Vendors that do not have a compelling and competitively-priced portfolio of devices ready to ship in time for the crucial last quarter of the year are likely to be in for a rocky ride in 2010."