The race is on for the sub-$200 smartphone

February 8, 2012 - Openet

Will cheaper smartphones dominate the sector by 2016, and where does that leave feature phones? And will the ultra-low cost smartphone give operators better engagement with their customers? Guy Daniels reports.

New research from Informa Telecoms & Media suggests that the smartphone market will see a significant shift over the next five years, moving from predominantly premium devices aimed at advanced users towards cheaper, mass-market devices. However, don’t expect to see sub-$100 smartphones anytime soon – at least not before 2013. Until then, $200 will be the target price.

According to Malik Saadi, principal analyst at Informa, 81 per cent of all smartphones shipped in 2011 were sold at a wholesale price above $300. However, this proportion is expected to decline to below 50 per cent in 2016:

“As economies of scale build, smartphones will progressively migrate to lower price points. Devices priced between $200-300 will particularly be attractive to operators because they enable the democratization of mobile Internet while being very easy to subsidize. This segment will be the fastest growing part of the smartphone market within the next five years.”

Informa predicts that sales of these devices will grow from 41 million in 2010 to over 206 million units in 2016. But for smartphones to attract mass-market consumers in emerging markets, prices will have to fall below $200.

According to Saadi, the market share of the sub-$200 smartphone will increase to 24 per cent in 2016 from just 5 per cent expected for 2012:

“China will be the largest market for smartphones in this price segment, with a potential market share of 20 per cent of the global total in 2016, while India will be the second-largest single market for these phones with 14 per cent.”

He adds that sales of this type of device in Western Europe and in North America will be very small – the shares of these regions are not expected to exceed 4 per cent and 3 per cent, respectively.

Ultimately, the goal is to produce the sub-$100 smartphone, and bring internet access to a greater number of people for a very low price. However, this brings them into direct competition with feature-phones. If feature-phones become smarter, whilst retaining their low unit selling price, what chance will the sub-$100 smartphone have of capturing market share? Feature-phones use less advanced and less expensive hardware. According to Saadi:

“Sales of these devices will be challenged by the more-optimized smarter feature-phones that will increasingly offer a decent Internet experience at lower price points. The ultra-low-cost smartphone market is not expected to mature before 2014 and annual sales of these devices are not expected to exceed 60 million units any time before 2016.”

He adds that unlike today’s high-end $300+ smartphones, operators have the opportunity to influence consumers’ experience more by defining the end-user experience in conjunction with vendors to operators’ advantage.

However, unrelated research released yesterday by Openet questions how mobile operators are engaging with their customers. A survey of 127 senior managers at the world’s largest mobile operators showed that operators want to better engage with their customers, and believe that enabling self-personalisation via real-time direct-to-the-device communications and controls can deliver an improved, simplified experience.

89 per cent of respondents said that providing real-time service controls would enhance the customer experience, and 79 per cent expect to see subscribers setting controls on their devices in 2012. Yet 50 per cent said they do not currently have these capabilities on mobile devices.

Openet also asked about mobile data usage – particularly important in the age of the smartphone. According to the results, in order to increase data ARPU and deliver a better customer experience, operators expect to see changes to data pricing in 2012, with many operators offering new data plans and offers. These include multi-device plans (93 per cent of respondents), group data plans (87 per cent), and some operators also expect to see more speed tiers (85 per cent) and a general move to value based pricing. As the report summarises:

“Operators want to engage more with their customers via their smartphones. The vast majority of operators surveyed say that mobile data rating must be real-time and feel that the complexity of data plans will be a strain on existing rating and billing systems.”


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