Android Smartphones Get Cheaper and Cheaper
Consumers have typically considered smartphones a luxury until recently. Feature phones used to be commodities, and now smartphones have become commodity products, with all the hype directed toward newer and more high-tech items such as tablets and “phablets,” a hybrid between a smartphone and a tablet. It was not too long ago that Verizon, Sprint and t-mobile cheap phones were all feature phones. Now, Android smartphones are expected to be as cheap as feature phones.
At the Mobile World Congress, Google Executive Chairman Eric Schmidt said he expects the price of Android smartphones to decrease from the $200 to $400 range to $100 to $150 by 2013, and then eventually reach as low as $70, the feature phone price point.
Ovum Research analyst Tony Cripps said the $70 price point is realistic because of the “advancement of technology and huge economies of scale that are starting to drive the Android economy.”
What does this mean for cell phone manufacturers and service providers? Luckily, this will not have a negative impact on their profitability, as long as they have a strategic business plan.
“There will always be a variety of different features. As long as consumers will spend $400 on Nike shoes, then there will be people who spend $200 on phones,” Gartner analyst Ken Dulaney told eWEEK. “And they will market the high-end ones because that is where the profit comes from, just like in shoes.”
Current Analysis analyst Avi Greengart says, “Nokia makes good margins on its entry-level feature phones, so it is certainly possible to make money there as that market slowly transitions to smartphones over time.”
According to Greengart, companies should not enter markets unless they can maintain high margins. Apple is a good example of such a company. They are slowly lowering their price tiers, but they’re doing it at the right pace to remain profitable.
More affordable smartphones also means more consumers will be able to afford data plans. This is good news for Google, and businesses in general, because not only will Android grow significantly but there will be more mobile ads to target more consumers.