LOS ALTOS, CA -- Huawei and ZTE are grabbing communications equipment market share, driving down prices and reconfiguring the outlook.

That's according to the latest newsletter from Henderson Ventures. The research firm forecasts world production of communication equipment to fall 10.5%, withChina down 6.9%, North America down 15.8%, Western Europe 16.1% and Japan 18.3%.

The firms points to slumping mobile phone sales, excess network capacity and "the protracted death of traditional telecom technology," coupled with intense price competition in handsets and network equipment. The two major Chinese telecom firms, Huawei and ZTE, are rapidly gaining market share, although neither has staked a dominant position as of this time.

Henderson forecasts handset shipments will drop 6.3% this year, before rebounding to 8.1% growth in 2010 and 10.3% growth in 2011. The bright spot is smart phones, which continue to add capabilities.