Shift in smartphone market: lower-end devices to dominate by 2016

According to the latest research from Informa Telecoms & Media, 81% of all smartphones shipped in 2011 were sold at a wholesale price above US$300; however, this proportion is expected to decline to below 50% in 2016.

"As economies of scale build, smartphones will progressively migrate to lower price points. Devices priced between US$200-300 will particularly be attractive to operators because they enable the democratisation of mobile Internet while being very easy to subsidise. This segment will be the fastest growing part of the smartphone market within the next five years," comments Malik Saadi, principal analyst at Informa Telecoms & Media.

Sales of these devices will grow from 41 million in 2010 to over 206 million units in 2016. Android, Symbian and BlackBerry are the only platforms playing in this segment so far, with respective market shares of 48.5%, 38% and 13.5% in 2011. Almost two-thirds of Symbian's total sales in 2011 were generated by this price range.

Second phase

The smartphone market has now entered into its second phase of development whereby operators are focusing heavily on value /mass-market smartphones.

Unlike the high-end US$300+ device, operators have the opportunity to influence consumers' experience more by defining the end-user experience in conjunction with vendors to operators' advantage. In this area, Android is seen as the best opportunity for operators to define the end-user experience, although a problem here is that fewer devices are sold with data plans attached.

Smartphone prices will have to fall below US$200 to attract mass-market consumers in emerging markets. The market share of this device category will increase dramatically to 24% in 2016 from just 5% expected for 2012. China will be the largest market for smartphones in this price segment, with a potential market share of 20% of the global total in 2016, while India will be the second-largest single market for these phones with 14%. Sales of this type of device in Western Europe and in North America will be very small - the shares of these regions are not expected to exceed 4% and 3%, respectively.

Don't expect ultra-low-cost smartphones yet

Informa does not expect ultra-low-cost smartphones, those priced below US$100, to hit the market any time before 2013. "Sales of these devices will be challenged by the more-optimised smarter feature-phones that will increasingly offer a decent Internet experience at lower price points. A number of device vendors and chipset manufacturers are now busy integrating key applications such as particular mobile browsers and Web search engines, YouTube, Facebook, Angry Birds into their hardware," explains Saadi.

"Their aim is to bring key Internet applications to below US$100 market. Open OSs involve more general-purpose processes that require rather more advanced hardware, which makes them more expensive for a similar experience offered by smarter phones at these price points. The ultra-low-cost smartphone market is not expected to mature before 2014 and annual sales of these devices are not expected to exceed 60 million units any time before 2016," he concludes.

Note:

Bada and non-certified Android platforms are not considered as smartphones in this research. However, Informa has sized their market opportunities in a different research program.