Handset Makers Follow Motorola

Written by Adam Gosling

Friday, 17 August 2007

The past year has seen Motorola focus a great deal of the company's energies on the development and market building activities around ultra-low-cost handsets for emerging markets. From now on, though, it can expect to face a lot more competition in this business as other handset makers find ways to compete. Motorola CEO ED Zander's strategy to all but abandon the high-end smartphone market to Nokia, RIM and even Palm, offering only the Moto Q to compete has left the company with plenty of effort to put into the low-end high volume part of the market. While Motorola's financial results are yet to really reflect the outcome of this strategy, if imitation is any form of flattery Motorola could be said to have made the right choice. More than a dozen competing handset vendors will be shipping sub-US$50 models by 2008. What remains to be seen is whether that early entrance and effort can pay off for the company long-term. According to an ABI Research study, "Ultra Low Cost Handsets" which looks at the historical and current market for ultra low cost handsets and evaluates its long term growth potential. Motorola and Nokia currently dominate the segment, but Samsung, LG, and Sony Ericsson are showing increasing interest and other smaller vendors including ZTE, Kyocera, Huawei, Haier, Sagem, Ningbo Bird, Philips, and Rose Telecom are also beginning to address the market. According to ABI Research industry analyst Shailendra Pandey, "Having a good IP portfolio is a big advantage for the likes of Motorola and Nokia, but other smaller handset vendors will also be able to address the low margin ULCH market by cutting costs through manufacturing locally in emerging markets. They can also save on marketing and distribution costs by forming partnerships with mobile operators." A good IP portfolio means lower or no royalty fees, as vendors can benefit from cross-licensing agreements. Smaller vendors and new market entrants without significant patents have to pay high royalty fees for the licenses. This makes it more difficult for smaller vendors to address the ULCH market, which offers very low margins. Therefore these vendors are addressing the market by forming exclusive handset deals with operators, allowing them to save substantial marketing and distribution costs. For example, ZTE and Rose Telecom have been providing ultra low cost handsets to Reliance Communications, the largest CDMA operator in India. Huawei is providing low-cost CDMA handsets to China Unicom and ZTE, and also has agreements with Vodafone for providing low cost handsets. ABI Research expects that by 2011, almost one out of every four handsets shipped globally will be an ultra low cost handset. The research shows that India will be the biggest market in the next five years, growing from a little over 9 million handsets in 2006 to more than 116 million handsets in 2011. Related news items Tiny Rugged UMPC WIth Vista -10/10/2007 Hybrid Drive Boosts Laptop's Skillset -10/10/2007 Consumers Want FMC: Companies Don't See The Benefit -02/10/2007 Nokia Buys Map Company For US$8 Billion -02/10/2007 Seven In Unwired Takeover Bid -26/09/2007 Newer news items Boost Mobile Targets "Hot Young Aussies" -12/11/2007 Antennas Boosts Rural NextG -08/11/2007 Energizer's New AA Phone Charger -30/10/2007 What Colour Is Your Phone -27/08/2007 Nokia: Smooth, Black, Curvey & 3G -21/08/2007 Older news items Nokia Prism Has Mad Mod Look -07/08/2007 Nokia 3109: The Mobile Phone Refined -23/05/2007 Aussie Buyers Still Love Their Moto's -24/04/2007 Nokia Aims 6120 At Mid-Tier -17/04/2007 18-Carat Gold Nokia -17/04/2007 Tag This Now: