In 2009, a battle line was drawn. One that would create deep divides in the smartphone world, even within brands themselves, and will have a significant impact on the next phone you’ll buy.
What happened back then? Smartphones got good. Processing power reached the point where you didn’t have to choose between spending a year’s salary and having a decent experience browsing the web on the go, opening up the tech to a wider range of users.
As you’d expect over the years, that performance has been built upon to give us octa-core handsets with more RAM than a over-zealous farmer, putting truly phenomenal power in our pockets.
But that line, the one that showed a baseline of ‘acceptable smartphone performance’ has translated into phones that cost hardly anything to produce and could lead to the biggest change in the smartphone market to date.
And it’s not just the lesser-known brands that are championing this cause either: with the launch of the Moto E, Motorola has proved that the bigger brands have realised the true value in making a smartphone that’s within financial reach of as many as possible.
Samsung has a similar view: while the company is pushing hard to convince the world that its flagship Galaxy S5 is the phone most should own, the company is looking to launch its Tizen handsets into more developing nations like Russia and Tizen.
The reason for the shift is simple: the high end smartphone market is stagnating, with smartphone shipments actually starting to decline in countries like Japan (according to researcher IDC) as saturation levels kick in, users embedded in two year contracts who understandably don’t need to buy another handsets.
So connecting the next wave of smartphone users has become crucial if sales are to continue – and the best way to do this is to entice users on price.
This is already happening, with the average price of a smartphone practically halving from $450 in 2012 to $260 by 2018 – which means the profit margins of the big brands are going to get hit hard. The only way to keep high revenues afloat is to increase the number of handsets sold, and that means attracting more and more users the smartphone pie.
What is a cheap smartphone?
There are two strands to the ‘cheap smartphone’ sector that will have a big impact on the success of brands like Samsung, HTC and Apple in the years to come.
The first is the reasonably-priced smartphone for the developed nations with high smartphone penetration, something that offers a similar experience to the likes of the iPhone 5S or Galaxy S5 but without the hefty cost.
That’s where companies like Motorola and Nokia are targeting, and it appears to be working: Moto went from almost no presence in the UK to taking nearly six percent of the market according to Kantar World Panel with the Moto G, which offered impressive performance for a fifth of the cost of a top-end Android handset.
Nokia’s Lumia 520 managed a similar feat worldwide, proving popular in both Western and developing nations to become the top-selling Windows Phone on the market, and doing so at a price around 25% of the cost of a flagship phone.
This section of the market is going to get quickly filled with brands from Asia muscling in, able to offer low cost, high quality handsets thanks to a focus on specs over headline features.
“Motorola was nowhere in Europe before the Moto G launched in November last year, but the new model has since boosted the manufacturer to 6% of British sales,” said Dominic Sunnebo, strategic insight director at analysts Kantar Worldpanel ComTech.
“It highlights the speed at which a quality budget phone can disrupt a market. The same pattern can be seen in France with Wiko, which has 8.3% share, and Xiaomi in China with 18.5%.”
One of the leaders is OnePlus, a Chinese brand that’s brought out the OnePlus One, a phone with the spec list of the Samsung Galaxy S5, but dropped features like a super-bright AMOLED screen, heart rate monitor and waterproof casing to offer the One, a phone that costs half the price.
OnePlus isn’t alone: China has multiple brands selling millions of devices in their home territory who are able to use these economies of scale to churn out decent phones internationally – this move has started, and is only going to continue.
These phones are still north of £200 / $350, which is a yearly salary to some people in developing nations. But this market features billions of users who don’t just want a smartphone; the technology and connectivity it provides can open up new ways to conduct business, enabling rapid shifts in economy that simply weren’t possible before.
“The Moto E may prove useful for first-time smartphone buyers in Europe and some parts of the Middle East, but it won’t make a difference to first-time smartphone buyers in other developing markets such as Africa,” said Amr Shady, CEO of Middle East and African telecom provider.
“Motorola needs to knock another £80 off the price tag before it can even begin to be attractive to most Africans. The belief that the ‘budget’ offering will continue the momentum that the Moto G handset built in developing markets when it was launched last year will not be realised on this continent for some time.”
Retro is in
And this is where the effort of five years ago come into play, as that same level of processor is being used to create a phone that could cost as little as $25 / £15.
Mozilla’s Firefox OS was announced in 2013, designed specifically to target this next wave of smartphone users. The idea was to offer low-cost handsets, low on specs but with acceptable functionality, in partnership with networks worldwide.
Instead of resource intensive apps, HTML5 would be used to access to the same services on the web, enabling simple tools which perform vital services.
The project seems to be bearing fruit, as there are a number of handsets on the market from low-cost phone manufacturers ZTE, Alcatel and Huawei, with the likes of Sony and LG promising to deliver phones in the future.
According to analysts Ovum, “there have been 425,000 unique visitors to the Firefox OS Marketplace since July 2013” which is a strong uptake for a platform that’s only been going for a year, highlighting the growing need for devices in this category.
While these phones still retail for around $80, a deal between Mozilla and Chinese processor manufacturer Spreadtrum to enable 75% cheaper phones by creating a reference design for a chip to use in all Firefox OS-powered handsets.
This will enable faster and cheaper production of phones, and will increase the ability to bring smartphones to developing nations dramatically.
What does this mean for me?
Well, if you’re someone who likes to use high-end smartphones, the good news is you’ll probably be paying less in the short term or getting a better device.
The Galaxy S5 was cheaper on average than its predecessor in a bid to maintain attractiveness, where other brands are extolling the virtues of more technologically advanced features to keep those wth more disposable cash interested in buying phones that command a better profit margin.
Apple, the most notorious brand for high margins, has already been forced to clip these slightly in bringing out the iPhone 5C, and there’s every indication that the iPhone 6 will have a larger screen and all-new design – and enabling this tech will either eat into the company’s profits or force an even higher premium on one of the most expensive phones on the market.
And it’s not just Apple that’s reacting – HTC has been pushing hard at making attractive, but expensive, casings for its One range and LG is set to bring a QHD screen on the G3 in a bid to convince consumers that the latest tech is still worth paying for.
The rise of the mid-range phone will directly impact the price and performance of 2015’s flagship models, forcing brands to compete with the likes of OnePlus on cost or offer genuinely attractive features that warrant the extra pressure on this pocket.
The next half-decade will see more of a push into both cheap and ultra-cheap smartphones to enable more users to join the smartphone revolution – as the battle for your pocket space intensifies, ultimately, it’s the consumer who’s going to win
Culled from Indian Times