Low-cost handset market set to boom

While the merits of Microsoft’s strategy targeting the ultra-low cost handset (ULCH) market are being questioned by industry analysts, a recent report published by ABI Research predicts that more than 330 million handsets priced at less than US$20 will ship annually worldwide by 2011.

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By  Aaron Greenwood Published  February 2, 2007

While the merits of Microsoft’s strategy targeting the ultra-low cost handset (ULCH) market are being questioned by industry analysts, a recent report published by ABI Research predicts that more than 330 million handsets priced at less than US$20 will ship annually worldwide by 2011. The study estimates that more than 50% of these handsets will be shipped in the emerging markets of Asia Pacific and the remainder to markets in Africa, the Middle East, Latin America, and Eastern Europe. “The growing demand for ULCHs has provided mobile operators and handset vendors with a quick route to a greater share of the emerging markets,” said ABI Research analyst Shailendra Pandey. “The downside is that they are manufacturing and shipping a greater proportion of low-cost handsets, which can adversely affect their profits.” Pandey highlighted Nokia, whose profits in the third quarter of 2006 were down compared to the previous corresponding quarter, because a greater portion of its sales came from low-cost handsets. Mobile operators will also see declining ARPUs because ULCH users are mostly from low-income communities in emerging markets. Their monthly spending will usually range from $2 to $5. Nevertheless, addressing the ULCH market is important for handset vendors and mobile operators to establish their brand and gain long-term growth and profitability in emerging markets. ABI found the ULCH marketplace was currently dominated by Motorola and Nokia, but other handset manufacturers including LG Electronics, BenQ, Samsung, Philips, and Kyocera have also started to introduce handsets for this segment. As the winner of GSMA’s tenders for the Emerging Markets Handset Program, Motorola has already shipped six million sub-$40 handsets and another six million sub-$30 handsets to key emerging markets including India, Pakistan, Turkey, South Africa, Nigeria, Egypt, Algeria, and Ukraine. ABI Research expects that by 2011, almost one out of every four handset shipped globally will be an ULCH. 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.

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