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March 20, 2014 at 09:50 PM
Investors following the telecom industry might want to go bargain-hunting — for the stocks of smartphones designed with lower-end prices in mind and the companies that make them what they are.
That’s where the growth potential is in emerging markets, and that’s the market phone manufacturers are seeking out. This is specifically true for China and India, where a vast untapped market will gain phone access to the Internet for the first time. That market also beckons chipmakers as well as software and social media companies, all of whom stand to benefit from broader use of smartphones.
As a growing middle class moves up to smartphones, makers are racing to capture their patronage. Phones priced under $100 have seen sales more than triple from 2012 to 2013, and phones at half that price or less have soared from less than a million in 2012 to nearly 20 million last year. Some companies eager to take advantage of such a burgeoning market are stripping down phones, sacrificing features for price, while others are determined to cut price while finding ways to keep the bells and whistles that lure buyers.
Canada’s BlackBerry went down that road in December, making a deal with Foxconn to design and market the former’s low-end smartphones in Indonesia, another underpenetrated market. Nokia, despite its impending ownership by Microsoft, has resorted to using Google’s Android software to wade into the low end of the smartphone pool with its Nokia X, priced at 89 euros ($120).
South Korea’s LG has announced plans to double its market share in smartphones by broadening the range of its products, adding lower-priced models to appeal to a broader audience, and Mozilla is probably the most ambitious pricewise, showing off a prototype for a smartphone that will sell for $25. While that is definitely the low end of the price spectrum and offers only very basic features, the company, mostly known for its Firefox browser, has also brought out higher-end models. Mozilla is working with budget chipmaker Spreadtrum on the $25 model, while the more expensive phones will come from such makers as Huawei and and ZTE.
BlackBerry may be getting into the lower-end smartphone market in Indonesia, but its messaging is in for a challenge as South Korea is pushing its own messaging apps in Indonesia’s very active social media market. Kakao Corp. has enlisted pop stars as marketing aids, and is offering unlimited KakaoTalk data through the Indonesian carrier Telkomsel. And Samsung is moving in as well, with a partnership with South Korea’s Naver Corp unit Line Corp. Samsung’s Galaxy line of smartphones has Line preinstalled. Nokia, too, is getting into the act, planning on including Line on its low-end smartphones.
