BARCELONA Feb 26 The mobile phone industry is
now looking to the fast-growing demand for smartphones priced at
$100 or below as the market for fancier high-end devices has
become saturated, but not all handset makers are able or willing
to trade down.
Much of the talk this week at the Mobile World Congress in
Barcelona, the industry's biggest annual trade fair, has turned
from the latest big screen, premium-priced devices to the new,
entry-level smartphones that analysts say now overwhelmingly
represent the industry's best hope for growth.
"All the phones now look the same," said industry analyst
Ben Wood of CCS Insight after surveying the eight vast halls of
phones and other mobile gadgets on show.
"The ability of top brands like Samsung, Apple
and Nokia to differentiate themselves is
getting harder," he said.
Growth in global smartphone shipments will fall sharply this
year and keep slowing through 2018, with average prices dropping
significantly as the demand shifts to China and other developing
countries, market research firm IDC said earlier on Wednesday.
So now phone makers are touting new, low-cost devices which
are intended to retail at near $100 or below. This class of
device has some but not all the features of the current top end
smartphones, which sell for several hundreds of dollars and
until this year drew nearly all the media attention and
marketing spend at Barcelona.
Early leaders in this new market are Chinese players, some
with global brand names and others who remain virtually unknown
outside China, who have made huge strides in acquiring the
technical and design expertise that enables them to now drive
down the costs without necessarily sacrificing quality.
The biggest winners so far look to be Huawei,
Lenovo, TCL Communications and still
unfamiliar upstarts like Gionee, Oppo and CorePad that are
poised to become big international names in the coming years,
All benefit from having a home field advantage in China, the
world's largest phone market.
This shifting landscape has already forced Nokia, the former
mobile world-beater now struggling to stay relevant, to adopt
Google's Android software to gain entry to the low-end
smartphone market, despite Android being an arch rival of
Nokia's new-owner-to-be Microsoft.
Launching the 89-euro ($120) Nokia X, Stephen Elop, chief
executive of the Finnish group, called the sub-$100 range, "a
massive opportunity" with that segment of the smartphone market
now growing four times faster than the rest of the market.
Wood said Nokia's move spoke volumes about the pressures the
whole industry was feeling.
"The cheaper end of the smartphone market has become such a
big opportunity that, eventually, Nokia had to go to a rival
software system -- Google's Android," he said, describing the
move as "hugely controversial, but necessary".
The cheap stripped-down smartphones, which often sacrifice
big screens, memory, and camera quality and have fewer novelty
features such as fingerprint recognition, are designed to reach
potentially billions of new consumers in emerging markets.
Smartphone sales last year overtook for the first time sales
of so-called basic 'feature' phones, which focus on just calls
and texts with a pared down Internet access, according to market
tracking firm Strategy Analytics.
And IDC analyst Francisco Jeronimo said smartphone sales in
the sub-$100 category alone more than tripled to hit 159 million
last year from 45.4 million in 2012. Sub-$50 smartphones grew
even faster, up from just 900,000 in 2012 to 19.5 million last
However, this growth in demand is pushing up the cost of
components, a surprising twist in an industry more familiar with
falling material prices as technology evolves.
China's ZTE Corp, whose mobile business is
aiming for 50 percent growth in shipments to 60 million phones
this year, has seen the component supply crunch.
"All vendors face the challenge of the cost of key hardware
components such as screen displays, memory and keyboards," said
Qian Hao Lv, head of ZTE's device strategy. "These are crucial
to differentiate one model from the next."
Nonetheless, Kan Yulun, another ZTE executive, said that
the company was working on new technologies to drive the cost of
smartphones down to $50 or below without compromising on
"We will find tech solutions to reach the $50 price target
by the end of this year," Yulun said.
He said he often hears from telecom operators in Africa, who
still sell lots of feature phones, that they were now hungry for
smartphones but need prices to come down to below $50.
The head of the pack in the sub-$100 race is the Alcatel
Onetouch brand owned by TCL. Its brightly-coloured Idol family
of phones have already proven a hit in Latin America and Europe
and the firm launched two new phones for under $100 at the
Mobile World Congress this week that can run on 4G mobile
networks being rolled out in China, Brazil, and elsewhere.
But while many players are now chasing the lower end of the
market not all are, fearing that stripped-down hardware features
can only lead to a commoditised market where no one can
differentiate and maintain a worthwhile profit margin.
Huawei, the world's third-biggest phone maker, prefers to
aim higher by increasing the proportion of its phones that sell
for 300 euros ($400) or more as opposed to the low-end it
defines as under 150 euros.
"We are not interested in the sale volume of those low-end,
low-priced phones," said Chief Executive Eric Xu.