What once looked like a sky's-the-limit market for smartphones has been grounded.
If this week's Mobile World Congress gave us any clue, low-cost mobile handsets are back in the spotlight. The battle over smartphones loaded with bells and whistles is fading. A new skirmish is emerging in the segment that used to be called feature phones. If anyone assumed that the industry's pundits and market research companies abandoned hope for feature phones a few years ago, well, not so fast.
"The real significance" of the market for phones priced below $50 "is the validity of the addressable sub-today's-smartphone market," John Jackson, program vice president for mobility research at IDC, told us. "The precise size is debatable, but it'll be in the tens of millions, if not hundreds of millions."
The Worldwide Quarterly Mobile Phone Tracker that IDC released Wednesday released confirms the significant slowdown in smartphone momentum. The research firm said growth in global smartphone shipments will fall sharply this year and keep slowing through 2018, with the average prices dropping significantly.
Worldwide smartphone average selling price by region and five-year CAGR (in US dollars). The asterisks indicate forecast data.
In fact, after 39.2% growth in 2013, when a billion smartphones were sold, the smartphone market will grow only 19.3% this year and 6.2% in 2018, IDC said.
Against this backdrop, unanswered questions focus on whether chip vendors and handset OEMs -- which seem singularly intent on adding more MIPS to their hardware -- are prepared for the shifting landscape. More importantly, do they even want to play in the market for next-generation, low-cost smartphones aimed at first-time users?
A closer look at smartphone sales by price range reveals a clear trend for higher market growth among cheaper phones. IDC analyst Francisco Jeronimo told Reuters this week that "smartphone sales in the sub-$100 category alone more than tripled to hit 159 million last year from 45.4 million in 2012." The growth was even faster for phones costing less than $50 -- "up from just 900,000 in 2012 to 19.5 million last year."
Many industry observers foresee a big shift in the smartphone market. Ryan Reith, program director with IDC, called 2014 "an enormous transition year for the smartphone market" in a press release on the quarterly report. "Not only will growth decline more than ever before, but the driving forces behind smartphone adoption are changing. New markets for growth bring different rules to play by and 'premium' will not be a major factor in the regions driving overall market growth."
When it comes to new rules, nobody dropped a bigger bombshell at the Mobile World Congress than Firefox and Spreadtrum. They announced an ambitious plan for $25 smartphones.