In recent months, I’ve been looking at the flipside of the smartphone phenomenon. Smartphones accounted for 13% of all mobile device shipments in 2008 and, by 2015, such devices will likely represent around one-third of all annual new mobile phone sales, we believe.
Giddying numbers. Especially for pressurised device vendors keen to stabilise their balance sheets and ensure continued revenue growth.
But smartphone growth will only come from the more mature markets where vendors and network operators have to work harder to convince existing mobile phone users to upgrade handsets on a regular basis. Not an easy task at the best of times, more so now than ever.
So, players must look to underserved or untapped markets for future growth prospects. Over the next six years, a good 75-80% of such new users will hail from emerging markets, where discretionary spend on ‘luxury’ goods and services is low or non-existent. Consequently, vendors need to abandon notions that even basic mobile phones are beyond the financial reach and, indeed, needs of some of the poorest people in the world.
Let’s look at Nokia as an example of what’s happening in this quiet revolution. Nokia’s value-added service business can be combined with its low-cost devices to help even those on subsistence-level incomes to buy and use mobile phones and services that, in turn, can help them run their lives more effectively.
The Mail on Ovi solution, as well as a suite of educational, agricultural and other information-based services, is helping rural Indian farmers on low incomes to improve their education and offer tools suited to better organising the way they can grow and sell their cash crops, for example. (You can also see how mobile banking and entertainment would also fit in.) This scheme is being supported by several basic low-cost handsets, including the Nokia 1202. Priced at €25/$30, this is Nokia’s lowest-cost device so far.
At the same time, Nokia is pushing to bring the total cost of ownership (TCO) of mobile handsets to below $5. Currently, only four countries (including Bangladesh and Pakistan) have achieved this goal, and then only where network operators are willing to eschew traditional sales and marketing models.
Nokia believes that entry-level devices (priced at $60 or under) accounted for 45% of total mobile phone shipments in 2008, up from 35% in 2007. This translates into 535 million entry-level devices being sold in 2008, up by 35% year-on-year.
A new report from Juniper Research, due out this week, forecasts how future low-cost handset shipments will grow over the next six years. The report believes that, by 2012, nearly 716 million low-cost handsets (around 56% of all device shipments) will be being sold. This number will then dip slightly as players meet with quick success in penetrating this exciting new market.
Many other vendors are now highly focused on developing new high-end products. But perhaps they should also be looking to the other end of the scale to ensure they don’t miss out on the burgeoning opportunities there? Can they afford not to? And can low-income customers afford to be left out?
Tags: emerging markets, forecasts, juniper research, low-cost handset, Mail on Ovi, mobile device shipments, mobile handsets, mobile phones, Nokia, Nokia Life Tools, Ovi, sales volumes, smartphone, TCO, total cost of ownership
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