It may seem like a long time from now but global handset shipments will increase 29% from 1.7 B in 2012 to 2.2 B in 2016 according to ABI Research. The key driver of this growth will come from the smartphone segment, which is forecast to become larger than the ultra-low cost, low-cost, and feature phone segments combined by 2016. The total shipments of non-smartphones will grow 1.08 to 1.09 B in 2016 while smartphone shipments will grow from 643 M to 1.1 B over the same period.

My son went to the Verizon store a couple of months ago and just wanted a basic phone that he could use for calls and texting.  They only offer one or two models that are not considered to be in the smartphone category.  It is obvious that it will not be long before these disappear in stores in the US leaving only smartphones as the only option.  Of course, those always require a data plan on top of the normal voice plan.

ABI goes on to say that OEMs that have had historic success addressing the low-cost handset segments will be under tremendous pressure to shift their portfolio to smartphones. Considering that they currently serve consumers with low disposable incomes, these OEMs will need to deliver smartphones that are price competitive to low-cost handsets. “This emerging scenario could become a very dangerous situation for Nokia’s handset business as the smartphone and feature phone segments will not be able to support each other in trying times,” says Kevin Burden, vice president and practice director, mobile devices.

Low-cost OEMs that are shifting to smartphones, such as Huawei and ZTE, will be a key driving factor for the growth and innovation in the sub-$150 smartphone segment. Low-cost smartphones are forecast to grow from 45 M shipments in 2012 to 170 M in 2016. “The writing is on the wall: either you have a successful smartphone strategy or you will have to steal market share to grow,” says Michael Morgan, ABI senior analyst, mobile devices.