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How smartphone companies are wooing customers
When Apple chief operating officer Tim Cook confirmed that the company was working on a cheaper iPhone model during an analyst meet, he was actually acknowledging the global phenomenon of reaching out to consumers in the lower-price segment.
According to an Evalueserve report, overall sales of expensive handsets over the next five years are likely to decline as low- and middle-income countries, like China and India, start dominating the marketplace -- the two countries accounted for 30 per cent of the global mobile subscriber base in 2009 from 20 per cent in 2005.
To meet the rising demand, manufacturers are likely to reduce the price points for mass-market phones, but increase the number of features in low-cost handsets.
Evalueserve estimates the average sales price of handsets to decline to $68 (around Rs 3,060) by 2015.
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How smartphone companies are wooing customers
Further, the report says, approximately 70 per cent (4.8 billion) of all active handsets globally would cost under $100 (around Rs 4,500) by 2015.
The trend has been substantiated by the decline in average sales price of handsets by industry majors.
According to Evalueserve, Nokia, the largest handset manufacturer, recorded a 39 per cent fall in its ASP between 2005 and 2009. Similarly, Samsung's handset ASP declined by 33 per cent during the same period.
India has witnessed a drastic drop in pricing over the past two to three years.
Smartphone prices continued to drop during the year and as competition increased, devices were made available by vendors at successively lower price points.
So, while 80 per cent of total India smartphone sales were below the ASP of Rs 18,000 in Q2 of 2010, it increased to 90 per cent in Q3, says IDC's India Quarterly Mobile Handsets Tracker, 3Q 2010.
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How smartphone companies are wooing customers
With handset enhancements becoming a norm and drastically declining ASPs, the distinction between the smartphone and feature phone categories is also expected to blur.
Smartphones and basic handsets are expected to squeeze feature phones from both ends, largely polarising the market between two extreme ends of the handset market, making the feature phone a casualty of the new market dynamics.
Smartphones are handsets with generic operating systems fostering third-party application development by promoting relevant software development kits and established marketplaces.
Feature phones are defined as handsets selling on the basis of a specific feature like a 'qwerty' keyboard or a high-resolution camera.
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How smartphone companies are wooing customers
"With increasing competition between the manufacturers to maintain their market share and reduce prices, they are going to provide handsets with enhanced features.
What this would mean is that handsets would have multiple 'USP' features and would increasingly tread on the smartphone track.
This would translate into handsets that were being sold through a single USP -- like a camera phone or a music phone -- attracting less public interest since in the same price bracket there would be smartphones available with an enhanced list of features," says Prasoon Sharma, group manager of device intelligence and research in ICT practice at Evalueserve.
Almost 90 per cent of the low-end handsets in India are equipped with FM Radio.
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A high percentage of low- to mid-level priced phones have SD memory cards along and a music player.
Navin Mishra, lead telecom analyst of Cyber Media Research, agrees: "Features present in high-end phones two-three years ago are now available in a variety of phones.
"The lines will be further blurred with 3G coming in. An entry level 3G-enabled smartphone is available for as low as Rs 5,000.
As market gets used to a particular feature and as that product becomes a volume generator, prices will further fall."
Take the case of Research in Motion handsets. Few years ago, a Blackberry would have been priced between Rs 20,000 and Rs 25,000.
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How smartphone companies are wooing customers
Now, they are being sold at Rs 11,000-Rs 11,500. IDC says the Q3 of 2010 saw a strong quarter-on-quarter (Q3 2010 over Q2 2010) growth in smartphone sales by 34.2 per cent and a year-on-year (Q3 2010 over 3Q 2009) increase by 294.9 per cent.
This clearly underscores the trend of Indian mobile handset consumers starting to show a greater preference for smartphones.
These innovations by domestic manufacturers like Micromax, Maxx and Lava, among others are forcing industry majors like Nokia, Samsung, LG and others to launch similar products.
For instance, Nokia will soon introduce Nokia X1-00 handset that comes with an audio jack, FM radio, a MicroSD card support for around 16 GB space, a dedicated torch and a long-lasting battery.
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How smartphone companies are wooing customers
The acceptance and popularity of Android as an operating system has also been responsible for the diminishing difference between a smartphone and a feature phone.
"In terms of OSes earlier you had RIM, Symbian, Palm and Apple. But the open source-based Android has changed the market place," says Mishra.
An Android smartphone is available in the market for as low as Rs 5,000 to Rs 6,000.S N Rai, co-founder-director of Lava International, believes the feature phone segment will be negatively impacted, but smartphones will be a segment that will allow only serious players to gain market share.
"Smartphone is about the eco-system. We, too, are in the process of developing applications. We have set up a design house in Bangalore and a software development team as well," says Rai.
The company will launch its first 3G-enabled smartphone in June, priced around Rs 9,000.
