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Mobile World Congress: Revisiting the $85 smartphone

While a low-end 3G Android smartphone could be sold currently at U$80 (wholesale price) and the adoption of ARM’s Cortex A5 should allow smartphone costs to fall to around US$50, they’ll still have some way to fall to catch up with the cost of 3G feature phones that are already reaching price points of below $30.

via » #MWC11 Day 3 – Same old song. (Informa)

The ubiquity of smartphones is inevitable.

  • airmanchairman

    … as the "Race To The Bottom" gathers pace.

    Won't every cellular handset become a smartphone at this rate, and if so when?

    Projections please, esteemed number-crunchers!

    • http://twitter.com/aegisdesign @aegisdesign

      It's almost impossible to buy a phone that doesn't have email, web browser, skype, youtube and most of the common apps built in. Most also allow new apps via Java. Some even multitask better than the iPhone did until recently and still better than Windows Phone does today.

  • Hamranhansenhansen

    The problem is the monthly bills, though. Currently, carriers are double billing, charging for voice and texts (data) and also for data. What is needed is for phones to have data only, $30-$50 per month, and then there is no "data tax" to getting a smartphone. Carriers don't want to do it, but it is inevitable. My iPad with $30/month unlimited data has put me off my iPhone, which is $90 per month and I almost exclusively use the data plan only. I pay $40 per month for "voice" which I rarely use because a) I make fewer calls than ever, and b) Skype or FaceTime is more appropriate for the calls I do make. I think this mess is what is at least partly behind the rumor of Apple becoming a virtual carrier. They can make their products data-only, run FaceTime over 3G, and charge users $50 per month for unlimited use and make a killing on both the carrier part and also on selling about 20 times the devices to people who are still using feature phones because they don't want to pay more than $50 per month. If Apple does a low-end iPhone, they make even more of a killing.

    What is the wholesale price of an iPod nano? At $149 retail for 8GB, it must be getting down in the $80 range. The 16GB is only $179. What if Apple built a phone version of iPod nano? Maybe with a 2x tall screen, 4GB storage, 32 built-in apps? Things like Music, Contacts, Calendars, of course, but they could also do Facebook and so on, like they do Nike now. I think that would be a dream phone for many people. At $199 with no contract, it would be $50 on top of the iPod nano you were going to buy to go with your $50 feature phone anyway. But the key thing would be you can't charge $80 a month for service, you have to charge $30-$50 and get rid of the voice calls and text surcharge.

    People are passing on a $49 iPhone right now at AT&T and getting a $50 feature phone at MetroPCS because they want to pay MetroPCS $40/month unlimited, not pay AT&T $80/month plus anything else they can tack on. So cheap smartphones have to address the monthly plan. By making the phone cheaper, that reduces the hardware portion of the monthly bill, but when you do that, you're throwing away a piece of Apple's pie. If you charge the user only for data, that reduces the csrrier's part of the pie. Even in a low-end phone, Apple will want to make the best, so I think they have a big reason to become a carrier and kill off the double billing so it isnnot just the hardware getting squeezed.

    • http://twitter.com/aegisdesign @aegisdesign

      These droids are not the droids the US carriers are looking for.

      Outside the USA most of the world sells $100-150 droids with pay as you go or SIM only plans that include voice and data for $10+ for a typical months use.

      For instance, in the UK Three.co.uk do 1 month rolling SIMS with 100 minutes, 3000 texts and 1GB internet for £10 inc VAT (VAT is 20% here).

  • newtonrj

    I see the next gen phone users a lot. Most are carrying Android or Symbian. Their needs are txt, then web, then voice (parents), then music (ripped). When I talk tech to them about iOS, they love it, but can't afford it. Not the buyin hardware costs, but the monthly recurrent. As long as there are burner pre-paids for $30 that come with all-you-can-eat txt as long as you have at least 1 min of voice time left, <18yr olds on a fixed budget will not adopt up.

  • Andrew

    The "Smart" part of a "smartphone" is now really affordable, compared to the hardware, so iPhone alternatives compete with slower processors, less memory, lower-resolution displays and keypad or stylus rather than touch input.

    Even so, for poorer users, it's a three-way battle of pricing plans: what the carrier offers to attract customers, what the carrier tries to charge to get more money out of customers and what the customers do to get the most out of what the carrier's base deal offers and avoid paying any of the carrier's extras.

    This produces different results around the world, depending on the carriers in each country and what their marketing departments offer, as users find ways to keep their phone use within their data plans. For example, in the UK, my relatives never call me, which costs money, they send texts, which are free. In Japan, phone calls to relatives are free and texts are the same as email, which counts against your data plan and may cost money.

    From the outset, Apple has confronted the conundrum that what carriers provide to make money and what consumers use to save money has been holding back the development of mobile phone technology. The more Apple can expose that contradiction, and make carriers charge for what things really cost and users pay for the services they really want to use, the sooner we can expect all phones to be smartphones.

  • http://twitter.com/peter_burke_ceo @peter_burke_ceo

    you can't squeeze blood from a turnip. you can't squeeze money out of people who don't have it. along with the $85 smartphone will come creative affordable plans to entice people to buy them.

  • dubTX

    I chose T-Mobile five years ago because, Sprint didn't work in Austin TX well, and it was the only carrier of the big four that offered a $30/month base plan. Others offering at least $40/month. T-Mobile since has eliminated the $30 plan. They keep upping the minutes and upping the base price, as if no one could ever want fewer than 450 daytime minutes! I never exceed my 300 minutes.

    They give you more of what you don't want to justify charging you a higher base price. Then anything you DO want, they make it cost more and more to get. I recall when text or picture messages (beyond any texting base plan you have) were 10¢ to send/receive (vs no receive charge if you're in Europe). Now it's 20¢ for text and 30¢ for image!

    The base T-Mobile messaging bundle changed from $5 for 400 messages to $5 for 300 messages, and now to $10 for 500 messages!

    This breaks down as:
    1.25¢ / message – 5 years ago
    1.67¢ / message – 1-2 years ago
    2.00¢ / message – today

    Did texting technology suddenly require higher costs? No, people are just texting more vs calling. The carriers see that and give you tons of worthless minutes, while jacking up the price of texts sent or received.

    My monthly bill is $35 (or $41 with taxes), and if I got an iPhone, I would have to pay at least $65 on AT&T, or $80 on Verizon. Double my monthly bill? This American oligopoly is a scam.

    This is another reason that Apple has much greater respect than networks. People see a one-time expensive buy as a treat or splurge. But a monthly $100 gouging from your cellular "orifice" (a Steve Jobs quote I cannot find) sucks. You may be cheerful dropping $60k for a Porsche, but it's the cost of gas, tires, maintenance that damages the experience.

    Cellular, cable TV, satellite radio, car lease, insurance, broadband internet, credit monitoring, netflix, magazines, et cetera are all to happy to have a monthly annuity from you that you'll just get accustomed to spending and forget about.

    No matter your financial condition, I imagine most people feel like a chump every time they see their $100+ mobile bill each month. No one wants to feel had.

    I think my point after all of that is that I'd upgrade to a nano-iPhone, but I don't want to be paying double each month. It's not the phone price, but the real total cost of ownership price that I (and I suspect many others) fear.

    A big reason I added AAPL stock over the past few couple of years is that I kept seeing people, who had no business spending big money once, plus monthly, on a fun gadget, getting iPhones. These people would cut back on all sorts of purchases, but not cut back when it's Apple.

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  • anobserver

    If the definition of a smartphone corresponds to the current breed of high-end devices, i.e. AMOLED screens, 12 mpx Xenon cameras, multicore CPU, large internal storage, etc, then the reality of cheap 85$ smartphones will crucially depend on the continued availability of very affordable components.

    The electronics industry has been traditionally seized by periodic bottlenecks in core parts, with the attendant price spikes. This was typical for instance in the case of RAM and NAND flash; there have been tensions regarding the supply of AMOLED displays as well. Some of these technologies depend upon metallic components such as rare earths whose supply is getting increasingly constrained for a variety of reasons.

    It would be prudent to factor these constraints when forecasting the advent of low-cost equivalents of a Samsung Galaxy S II.