Smartphones That Cost Under $150? It’s Right Around The Corner, Analysts Say

In about four years, one out of every two smartphones in the United States will cost under $150.

New research by communications analyst Informa Telecoms & Media shows the smartphone market over the next few years splitting into two segments  ---  one for low-end devices, the other for high-end devices.

Malik Saadi, the company's principal analyst, predicts the market for expensive smartphones, priced above $250, will shrink from the 85% of total smartphones sold in 2011 to 33% in 2017. Low-end smartphones, costing $150 or less, will gain enormous market share over the years, accounting for just over half (52%) of all smartphones sold in 2017.

The market segmentation comes from what Informa Telecoms & Media sees will be a continued effort by communications providers to reach into emerging markets in less-developed areas of the world, in addition to maintaining the current market of expensive and heavily-subsidized handsets . Competition in both segments will result is dramatic price erosion.

Saadi says the average price of a smartphone will drop from 2011's $188 to $152 in 2017.  

Another study released in November 2011 by researcher NPD Group showed smartphone handset sales have been rising,since the average price dropped below $200. The findings concluded smartphone sales claimed 59 percent of all U.S. handset sales in the last quarter of that year --- a 13 percent increase over the same period in 2010.

"As the market develops, the supply chain will increasingly be divided between two camps - the innovators who will continue to introduce new features and high-performance components to the market place and followers who will take this innovation to the mass market in later years," said Saadi.

That market shifting will prompt some established manufacturers to reposition and develop more effective handset-pricing strategies. A majority of those smartphone makers will have to target specific segments to reduce cost but maximize margins.

"These players will have to align their pricing strategy with market demand if they want to survive. The new environment will make it hard for all vendors to achieve a balance between generating scale and maintaining decent margins," Saadi said.