Smartphone prices head for $100 territory

Smartphone prices have begun to drop dramatically, as Intel, Microsoft, Nokia and Huawei and others start to ship low-cost units to the Middle East and elsewhere. "Mobile phones are not only getting smarter and smarter, they are also getting cheaper and cheaper," says Thomas Husson, an analyst at international research firm Forrester. "Cheap smartphones are entering developing markets and will enter the Middle East - no doubt about that." At the Mobile World Congress in Barcelona last week, Intel announced that it was partnering with Lava International, one of India's fastest-growing makers of mobile phones, to provide smartphones powered by Intel's Atom chips. The move is widely seen as an indication that Intel will rapidly start to sign similar partnership agreements with service providers in other regions, the Middle East included. Intel believes that as service providers roll out third-generation (3G) services and connect more cities in developing regions, the smartphone market will grow as a result of people accessing the internet from their phones. According to the research company IDC, about 19 million smartphones will be sold in India this year - a 78 per cent increase over last year. According to Lava, between 150 million and 200 million mobile phones are sold in India each year. At the moment, the bulk of these are standard mobiles, but it is estimated that within two yearsabout 50 million will be smartphones. The expanding smartphone market in developing economies such as India's represents a major opportunity for Intel and others as consumers in traditionally less sophisticated regions increasingly demand phones with more features such as email, location-based services, videoconferencing and mobile video and audio entertainment. "The mid-market as understood today is rapidly disappearing. Feature phones are gradually being replaced by smartphones even at the lower end of their market as the technology becomes more commonplace and the necessary economies of scale more achievable," says Tony Cripps, a principal analyst at research company Ovum. However, despite its long-term domination of the PC and laptop market, Intel has so far met with limited success in persuading makers of mobile phones to use its chips. But the developing world's growing appetite for smartphones is now providing Intel with an opportunity to break into this mushrooming global market. "We continue to work closely with customers as they develop smartphones based on Intel architecture," says Alistair Kemp, an Intel spokesman. "Our intent is to provide the best user experience to the mass market." But Intel already faces fierce competition in providing smartphones to regions such as India and the Middle East. Other chip makers, such as ARM Holdings, which dominates the mobile-phone market, are also partnering with handset manufacturers in an attempt to roll out low-priced smartphones in time to grab significant market share in developing markets. Far Eastern manufacturers are significant players. "The developing world represents a vast potential market for smartphone makers," says Mr Cripps. "Phones powered by Google Android software, in particular, are already making inroads into markets where smartphones haven't previously penetrated." Mr Husson adds: "The likes of ZTE, Huawei and other Far East manufacturers have a portfolio of affordable smartphones based on the Android operating system, and [the semiconductor company] MediaTek is powering some of these devices, too." As countries introduce more high-speed wireless telecommunications networks, smartphone adoption is likely to accelerate. "Less affluent regions in the Middle East, and elsewhere, will rapidly become realistic markets for aggressive smartphone makers as the cost to the consumer falls," says Mr Cripps. "But the real value in low-cost smartphones will only be unlocked as the networks that carry mobile internet traffic for smartphones become widespread and affordable to the mass market." Traditional mobile manufacturers such as the Finnish phone maker Nokia are also incorporating smartphone features into the handset ranges to target new markets. "Nokia's announcement they would include increasingly smart features in their Asha product range - including Microsoft's office product range - is also a sign that they are providing smarter devices that will compete with traditional BlackBerry devices that have been selling well in the Middle East in the last 18 months," says Mr Husson. Nokia is also determined to win market share by reducing the cost of top-of-the-range smartphones. Its new Lumia handset is expected to sell for US$253 (Dh929), excluding taxes and operator subsidies. In contrast, the Apple iPhone retails for about $600. But even Nokia's new price level is still high for consumers in emerging economies. Far Eastern manufacturers such as ZTE and Huawei are reported to be coming out with handsets priced at about $100. Once smartphone prices start to fall below $100, analysts are predicting, they will start to sell like wildfire around the world. The result is that consumers and businesses in the Middle East and elsewhere will increasingly see improved mobile communications at falling prices.