Android Smartphone Costs Dropping Big Time, Says Schmidt

Much of Google Executive Chairman Eric Schmidt’s keynote discussion at Mobile World Congress Feb. 28 concerned very forward-looking, sci-fi-type stuff.

Sample: People will deploy robots on their behalf to conferences and concerts when they can’t be both places at once. People will experience both activities through the robot via a screen they control at home.

But Schmidt also had exciting news he believes is going to become true in the near future.

Thanks to Moore’s Law, the cost of smartphones, which ranges from $150 to $300 subsidized by carriers, to as much as $800 unsubsidized, will drop precipitously by 2013. How much?

Schmidt said:

“Last year’s $400 Android phone is next year’s $100 phone, roughly speaking … there are people working on it. You need a phone with a basic screen and a basic browser that can run the kind of computation to do the things I’m talking about. And it’s happening. We have many, many partners, many of whom are here at the show, who are working at a phone in the $100 to $150 range and their eventual goal is to get it to the $70 range. If you look at the partitioning in feature phones, when you get to the $70 point, all of a sudden there is a huge new market.“

Schmidt made his comments in roughly 40 minutes here if you want to see them in full:

This is fantastic news for consumers, according to Ovum Research’s Tony Cripps:

“Schmidt’s expectation that Android smartphones will be available between $100-$150 by next year already looks inevitable and will begin to redefine the handset market as a whole. The eventual goal of seeing the price of Android devices brought down into the $70 range also looks realistic to us with the advancement of technology and huge economies of scale that are starting to drive the Android economy. Android’s astonishing growth so far may well look modest in coming years.“

Again, great news for consumers, but perhaps not so great for carriers, which make decent money from selling $200 to $300 smartphones with two-year contracts.

Cripps acknowledged this cognitive dissonance carriers might feel here. On one hand, they’ll be selling smartphones they once sold for $200 or more at less than half the cost.

On the other, if they have the right smartphone/price combination, they could have a hit seller that lures new customers and therefore new two-year contracts, which is ultimately where mobile operators butter their bread.

Cripps suggested carriers will have to lobby for more value-added services, or basically kiss Google’s ass for sweet deals.

Not exactly a winning proposition for carriers. But great for consumers.