LONDON More than a dozen handset vendors will be shipping sub-$50 models by 2008 according to research from ABI Research and by by 2011, almost one out of every four handsets shipped globally will be an ultra low cost handset (ULCH).
This 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.
“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,” said Shailendra Pandey, an ABI Research industry analyst.
According to ABI 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.
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.
The research shows that India will be the biggest market in the next five years for ULCH, growing from a little over 9 million handsets in 2006 to more than 116 million handsets in 2011.