Ovum: Sub-US$100 smartphones to get more common

Cellphones

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Xiaomi’s Redmi 2 sells for S$149 (US$108) in Singapore

Cheap smartphones costing under US$100 will form 40 per cent of the units sold by 2020, according to a report from research firm Ovum today.

These devices will be popular in both developed and developing countries, as their share of the market rises from just 13 per cent in 2014, it added.

The picture is not a rosy one for smartphone makers used to fat profits in the past five years, while telecom operators like those in Singapore may have to rethink a decades-long strategy of subsidising expensive handsets to win customers.

Already, people are paying less for their smartphones. Median handset prices have declined steeply from US$360 in the fourth quarter of 2013 to US$258 in the fourth quarter of 2014, according to Ovum.

“The entire device value chain is bending backwards to manufacture and distribute cheap smartphones at an acceptable level of quality,” said Ronan de Renesse, the lead analyst for Ovum’s consumer technology practice.

On the up are manufacturers such as China’s Xiaomi, which is making a name for itself in mid- and low-cost smartphones that offer the most important features (read about the Xiaomi Redmi 2).

Other players such as Lenovo have also brought affordable models to Singapore, where users identify strongly with brands like Samsung and Apple.

Market leader Samsung has suffered from the competition from low-cost Android rivals more than Apple, which still commands a loyal following.

This year, its Galaxy S6 flagship has not lived up to expectations, despite good reviews in the media (read our take on the phone).

As competition heats up, the lower cost of phones might also prompt a rethink among Singapore telcos on how best to attract and retain customers.

With more users opting for cheap phones without signing a contract, the old strategy of slashing prices for new phones through generous subsidies won’t work as well.

As network build-out costs rise with heavier usage, telecom operators may have to find new ways of differentiating themselves, besides relying on the flashy advertisements in the Saturday newspapers.

This month, M1 has already rolled out a plan that lets users roam overseas using their local data bundle, while StarHub is giving more free mobile data to customers who sign up for multiple services, such as home broadband and pay-TV.