Sales of Smartphones under $100 May Reach Half Billion in 2012

By Ariel Jones

In its recent "Technology, Media, and Telecommunications Predictions 2012 Report," research firm Deloitte stated that the number of $100 or under smartphones in use is likely to grow to 500 million by the end of the year. This is up from the sales numbers of low-cost smartphones in 2011, which the firm estimates at 200 million.

"Deloitte predicts that the $100 smartphone will sell at least 300 million units in 2012, representing about 20 percent of all mobile phone shipments in 2012, and about a third of all smartphone production (based on our broader definition of smartphones)," the report stated. "The $100 smartphone is likely to appeal to many different market segments."

In the study, the definition of smartphone was not dependent on an operating system, but on consumer perception of what features make a mobile phone a "smartphone" versus a "feature phone," which included touchscreens or full keyboards.

These smartphones would likely support email and instant messaging services, and may come pre-loaded with a variety of applications, including a web browser. Regarding connectivity, the mobile devices will probably rely on EDGE or GPRS, with few expected to have 2G or 3G. "A key upgrade in the $100 smartphone between 2011 and 2012 will be the incorporation of wi-fi as a standard part of the feature set," the report also stated. In addition, they will likely begin shipping with 200 to 600 MHz processors and be equipped with at least a 2 MP camera.

The largest market segments predicted to purchase these phones are consumers upgrading from feature phones, and parents looking for 'starter' phones for their children. "Operators should consider how best to ease these customers into using data; to that end, predictability of the data bill will be absolutely key," the Deloitte report stated. "With voice service there is a relatively simple relationship between time spent and cost, but with data the bill for watching a few minutes of video could deliver a 'bill shock' to a new data user - causing them to shy away from all future data services."

Deloitte offers the following advice for handset vendors: "Vendors should constantly revise their $100 smartphone offering... The price of many components is steadily falling - for example the cost of touch screens has dropped by about 30% annually in the recent past."

Low-cost smartphones will lack the processing power of smartphones equipped with more advanced operating systems, and hence, will not be ideal markets for app developers; as such, developers may need to offer variants of their apps that are suitable for lower-powered processors.

The report concluded: "Growing sales of $100 smartphones are likely to cause downward pressure on prices for the whole supply chain. Component manufacturers may come under growing pressure to lower their prices; this could give component suppliers from emerging markets an opportunity to break into the smartphone market."