The future is cheaper for regional smartphone adoption
Seventy-three per cent. According to IDC that was the share last year of basic “feature” phones in the overall Middle East and Africa market. What this number also represents is huge potential for vendors as the current dynamic of the mobile market is changing.
The world is shifting towards smartphones, and quickly. And the price factor is how vendors are going to convince feature phone users to make the switch to smartphones.
The most evident and critical motivator for owning a feature phone is cost, and such devices can be found that cost just tens of dollars. But the rise of cheap and affordable smartphones is slowly blurring the lines between these segments.
According to IDC, the usual names can be seen vying for a piece of the low-end market. These vendors include the likes of Samsung, Motorola, Huawei and LG, among other household names. That said, the Asian markets are also churning out some real dark horses. These relatively unknown vendors, such as Intex, G-Tide, Xolo and ZTE, have successfully penetrated the low-end market with prices that the biggest names in the industry are having trouble matching.
That said, there is a clear trend of consumers being willing to forego incredibly cheap brands for more established ones, even if it costs them slightly more. In this regard, Samsung and, more recently, Motorola have thrived. The latter recently unveiled its Moto G smartphone, a competitively priced device with midrange specs and the even cheaper Moto E.
One vendor that previously ruled the mobile market, but now only rules the feature phone space, is Nokia. The company has encountered much difficulty in convincing consumers to make the jump to its smartphones. Once considered a powerhouse, the phone maker is now fighting to remain relevant, mainly due to the operating system it runs – Windows Phone. However, during this year’s Build conference, Microsoft unveiled a vast array of much-needed updates and features as it strives to remain competitive and relevant.
Regardless of which vendors produce these lower-end smartphones, one must realise that they are not as good as their more expensive counterparts, but then again they don’t have to be. To lower costs, vendors make compromises in regards to the external and internal specs of their devices. The build quality will not feature high-quality metals or glass, but instead plastic. Screen and camera resolutions will be lower. Processors will be less powerful and there will be less memory. The networks they will run on will likely be 2G and 3G, not the latest and fastest 4G connectivity.
According to IDC, Android-powered smartphones account for 75 per cent of the regional market, and this represents another area where low-cost vendors can keep their costs down. Android and, more recently, Windows Phone, offer their operating systems free of charge for use on mobile devices. What Google and Microsoft forego on licensing fees, they make up for through revenues gained from the use of their services.
One vendor you will not see battling it out in this low end market is Apple, whose attempt to provide a cheaper iPhone, the iPhone 5c, was not well received. The phone was in essence an iPhone 5 with a plastic back cover. However, the phone did not fail due to its looks, but more due to its price. It was priced at about US$100 cheaper than iPhone 5s. Ultimately, consumers decided that the extra $100 was worth the significant upgrade to the iPhone 5s in terms of build and features.
The regional smartphone market’s growth is not being driven purely by the introduction of cheap handsets, but also by a strong push from the region’s telecoms providers. Data plans now represent a major source of income for telcos, and to entice consumers, they are offering low-cost data plans. This strategy not only entices existing customers to consume more data, but also attracts those wanting to make the switch from feature phones to smartphones.
In light of all this, IDC’s latest figures show that the sales growth for high-end smartphones is slowing, as key device makers have realised the importance of lower-end devices and are increasingly focusing their efforts on emerging markets and first-time adopters of smartphones. It is an indisputable fact of the market that the first step toward achieving this goal lies in the price.
Saad Elkhadem is a research analyst for IDC MEA
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Published: May 15, 2014 04:00 AM