Low-Cost Phone Market to Pick Up, Driven by Emerging Economies: ABI

While smartphone sales are booming, low-cost and ultra-low-cost handsets are also expected to turn upward, says ABI, thanks to first-time users in China, India, Africa and Latin America.

Smartphone sales may be surging, but the opposite end of the handset market is also expected to rise, fueled by emerging economies such as those in China, India, Africa, Latin America and parts of Asia, ABI Research reported Dec. 14.

With economies beginning to rebound from the global recession, ABI expects shipments of "ultra-low-cost handsets" to exceed 360 million by 2015, representing a compound annual growth rate of 22 percent. Meanwhile, "low-cost handsets" are expected to reach 249 million units. While emerging markets are seeing significant increases in mobile subscribers, reports ABI, there are still populations that haven't yet purchased their first mobile phone or mobile service.

"Falling prices in this market segment will make mobile phones accessible even to lower income groups in emerging economies," Kevin Burden, an ABI vice president, said in a statement. "In addition, the features and capabilities of devices in this category continue to improve, delivering a richer and more satisfying end-user experience."

Looking forward, ABI expects prices to fall, even at this lowest-cost end of the market. Phones with pricing at less than $60 currently are defined as "low-cost," but that price-point could fall to $40 by 2015. Meanwhile, "ultra-low-cost" phones, or those priced at $25 or less, will likely be available to end users for $16 or less. Partly driving down the costs will be increased competition among manufacturers.

"The entry-level handset space is clearly evolving," said Burden. "New entrants are shaking up the market and chipping away at the dominant market position held by some traditional [original equipment manufacturers]."

To stay competitive, he added, these vendors will need to look for new efficiencies in their manufacturing and supply chain processes - while keeping device quality high. Additionally, OEMs and ODMs (original design manufacturers) will need to better segment their markets to best serve the needs of their customers.

Nokia, the global handset market share leader, has had a difficult time competing at the high end of the handset market, where the Apple iPhone and Android-running smartphones dominate. When it comes to emerging markets, however, Nokia's got their number. In addition to low-cost handsets, it continues to roll out Ovi Life Tools - an information service that's accessible on its most basic feature phones. Following rollouts in China, India and Indonesia, on Nov. 2 it brought the service to Nigeria, Africa's largest mobile market.

Ovi Life Tools enables farmers, for example, to receive crop prices, and women to receive health care information for their families. Nokia calls it a "key part" of its "overall strategy to connect the next billion people by providing access to locally relevant services on affordable mobile devices."

During the third quarter, Nokia shipped 110.4 million units, which was up 2 percent year-over-year and down 1 percent sequentially. Converged devices - smartphones and mobile computers - reached 26.5 million units, which was up 61 percent year-over-year and 10 percent sequentially. On Dec. 14, Nokia acknowledged that it was delaying shipment of the E7, one the Symbian 3-running smartphones that it hopes will compete at the top of the market.