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Low-End High-Tech Mobile Phones to Reach World Markets

  • Ralph Jennings

The iPhone has become a status symbol in much of the developing world. But smartphones and their next of kin, media tablets, are falling in price as low-cost Chinese developers gain ground. That means cheaper mobile devices in countries that find the high end too expensive.

Smartphones such as the iPhone, the Blackberry and Samsung’s Galaxy series have sold handily for years in developed markets. Another 875 million are expected to ship this year.

Consumers in developed countries may pay more than $500 for each touchscreen handset. But prices are slipping as global shipments of smartphones and tablets grow, motivating new manufacturers to test the market. That trend means easier access for consumers in developing countries.

Wilson Mao, an analyst with market research firm TrendForce in Taipei, said smartphones eventually may sell for less than $100. He said they would be made in China.

Mao said the lowest priced smartphones will sell for $65 to $70. He said companies such as Lenovo, Huawei and ZTE, among China’s first-tier smartphone makers, will provide these handsets and that they already have experience in selling overseas.

Figures from the tech market research firm Gartner show that Chinese brands Huawei, TCL and ZTE have all seen sales grow. They shipped a combined 150 million smartphones last year, up about 15 percent over 2011. Gartner data also shows that last year smartphones cut into the market for less technically advanced feature phones, which were once the staple for developing countries.

Silicon Valley market research firm IHS iSuppli forecasts that low-end smartphone shipments will reach 559 million in 2016, more than twice last year’s figure. The cheaper units, led by China, are largely bound for the nearby developing markets of India and Indonesia.

Consumers will preview the newest smartphones and tablets in Taiwan next week. Smartphones big enough to look like tablets and tablets small enough to rival phones, for example, are forecast to go on display from Tuesday at the buzzing Computex Taipei tech show. Computex is one of the world’s largest annual tech shows and will bring together at least 1,700 exhibitors through its final day June 8.

Smartphones and slightly larger media tablets have fallen in price partly because components cost less. For example, Silicon Valley’s iconic chipmaker Intel has worked with mobile carriers in the emerging markets of Africa, India and Russia to develop obscure smartphone brands by offering them the key component, its Atom mobile device processor.

This year Intel plans to unveil a line of mobile device chips under the Silvermont series name. The company says these processors, designed for better smartphone photos and stronger Internet identity protection, will be affordable to producers of low-end smartphones. Intel controls 83 percent of the world processor market.
Competition also has increased as mobile device makers scramble to fill a void left by declining PC sales.

In the first quarter of 2013 compared to the same time a year ago, shipments of the traditional home and office computers dropped nearly 14 percent. Shipments are forecast to fall again for full year 2013 as the popularity of tablets has slowed replacements of PCs.

C.K. Lu, a smartphone analyst with Gartner in Taipei, says price pressure will mainly hit middle-end smartphone makers over the next two years as they struggle to differentiate themselves from the low end.

Taiwan’s HTC is one middle-end smartphone maker, and it reported a squeeze in profits over the past six months.

Lu said smartphones selling for $150 or less lack the screen quality and speed of their pricier peers, but still perform. “It does put price pressure especially on the middle end, it makes the middle end player more and more difficult to differentiate prods from low end because even the low-end spec is very attractive, or another term which is good enough to use,” he said.

Some analysts said top mobile device designers such as Apple eventually will release new devices to follow the low-price trend. Neil Mawston, executive director of Strategy Analytics in Britain, said Apple must release a small iPad within three years for hundreds of millions of cash-strapped, prepaid users.

Apple currently sells its iPad mini for as little as $329, down from about $400 for the larger iPad 2.