According to a new study from Informa Telecoms & Media, the smartphone market in 2017 will begin to diverge and sales will become dominated by two poles – the low-end devices priced below $150, and the high-end devices priced above $250. The expensive smartphones will find their market share shrinking from 85% of total smartphones sold in 2011 to 33% in 2017. In sharp contrast, the low-end smartphones will gain enormous amount of market share over the years and eventually account for just over half (52%) of the smartphones sold in 2017.
The average smartphone price will drop from $188 in 2011 to $152 in 2017 as a result of balancing the huge demand for entry-level smartphones in emerging markets and the demand for “super-smartphones” in developed markets. The devices’ average gross margin is expected to remain flat though, ranging from 20 to 25 percent. This is because vendors will increasingly be under pressure to absorb the cost of innovation while keeping up with price competition. To remain profitable, a number handset makers will have to continue to reduce their operational costs and some will struggle to maintain profitability.
These changes will push some established manufacturers to reposition themselves and come out with more effective handset-pricing strategies. Only a few manufacturers will have the ability to operate right across the market, while the great majority will have to focus on particular segments to reduce cost and maximize margins.
Informa believes that many established vendors like Nokia, RIM, LG, HTC, Motorola and Sony will find it hard to adapt to the new smartphone landscape, and will have to make a strategic decision to either fight in the high-end segment, a market which is currently dominated by Samsung and Apple, or alternatively face stiff competition by assemblers and Chinese ODMs in the low-end segment of the market… We’ll see where that goes and in the meantime, you can get further details about Informa’s report from Informa’s website.