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News Release from: Informa Telecoms and Media
Edited by the Electronicstalk Editorial
Team on 17 March 2006
Positive outlook for ultra-low-cost
handsets
A new report examines the challenges and opportunities facing ultra-low-cost segment of the handset market.
A new report examines the challenges and opportunities facing ultra-low-cost segment of the handset market "The Emerging Market Handset Programme (EMHP) has achieved a lot since its inception in October 2004"
This article was originally published on Electronicstalk on 8 Nov 2004 at 8.00am (UK)
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"However, this year will prove crucial to the development of the ultra-low-cost handset (ULCH) segment, a factor that may have encouraged the GSMA to extend its endorsement of Motorola as the Emerging Market Handset vendor for six months from 1st July", says Gavin Byrne, lead author of Informa Telecoms and Media's "Ultra low-cost handset strategic report".
The EMHP was the catalyst needed to encourage handset vendors to seriously examine how they can lower costs and address low income emerging market subscribers.
Cost reduction has largely been aided by the development of single chip solutions from the leading semi-conductor vendors.
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However, while handset costs fall it is important to reduce costs across the handset value chain, including taxation, distribution and retail.
Operator business models are being challenged as they need to offer lower service costs to lower ARPU subscribers.
While there is widespread optimism about the potential of ULCHs, operators remain cautious as to how many new subscribers these devices will attract.
Due to its experience, relationships and market knowledge gained with the EMHP, Motorola is likely to dominate the ULCH segment until 2007.
Although this may not encourage significant innovation, Ed Zander's 1000 day target for Motorola to become the number one vendor in terms of handset shipments may drive the company to own the segment, obliging it to produce the most compelling ULCH.
Byrne says: "ULCH definition is central to any attempt at market sizing".
Based on extensive research involving operators, handset vendors and component suppliers, Informa Telecoms and Media's report determines the likely combination of ex-works cost levels and feature sets that will be seen in the ULCH segment.
These robust models yield the ex-works cost level used throughout the report and define ULCH as reducing from US $40 in 2005 to US $28 in 2010.
"Based on this definition, sales of new ULCHs will pass 36 million in 2007 and reach almost 48 million devices in 2010, representing 5.3% of total new device sales by 2010", according to Byrne.
"This share will be significantly higher in the emerging markets, with ULCHs set to be a key driver particularly in Africa and India, where they will account for over 10% of new handset sales".
If lower cost devices and services can be made available to subscribers, in a growing device market with some competition, the outlook for ULCHs is positive.
However, the lower margins of the ULCH segment will contribute to significant market changes, with greater consolidation among handset vendors, their suppliers and operators being the likely outcome.
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