More than a dozen handset vendors will be shipping sub-$50 models by 2008. The ultra low cost handset marketplace is currently dominated by Motorola and Nokia, 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 nine million handsets in 2006 to more than 116 million handsets in 2011.
ABI Research’s study, "Ultra Low Cost Handsets," examines the historical and current market for ultra low cost handsets and evaluates its long-term growth potential. It discusses the driving forces, market barriers, the competitive business environment, and the handset vendors, semiconductor manufacturers and mobile operators addressing this market.
This study forms part of two ABI Research services: Mobile Devices and Wireless Handset Semiconductors, which include a variety of Research Reports, Research Briefs, Market Data, Online Databases, ABI Insights and analyst inquiry support.