A Handset in Every Pot
By Brendan I. Koerner
There are innumerable perks to being a citizen of a First World nation: ready access to potable water, the established rule of law, affordable Skinemax. But our relative affluence also means that the Nokias and Motorolas of the world figure that we're perfectly content to pay upwards of $150 for a fresh mobile handset. Don't they realize that we've got better things on which to spend our hard-earned dosh? As if I wasn't cheap enough already, now I've got to save up for the new Mork and Mindy Nikes that are coming out.
So I'm probably not alone in envying our brothers and sisters in India, China, or countries with similarly up-and-coming economic profiles. That's because the mobile handset vendors are falling all over themselves to provide these folks with handsets that retail for less than the cost of the Roasted Tilapia in a Bag dinner entrée from Red Lobster. They're not there yet, pricewise, but they're getting close thanks to some nifty chipset advances—not to mention a little gambling about the future consumerist proclivities of the developing world's nascent middle class. After the jump, a peek at the handsets that handset makers are hoping will be all the rage in Trivandrum or Fuzhou this year, as well as some minor ruminations on what this means for us low-end aficionados.
The business-side strategy of hawking lower cost handsets is pretty easy to divine: even with smaller margins on each unit, the volume of potential customers is simply staggering. This is actually an old chestnut; I'm currently re-reading Jonathan Spence's The Search for Modern China, in which he recounts the chop-licking of Western manufacturers as Chinese markets opened up during the 1920s. Things didn't quite work out on that go-around, of course, but all signs point to the situation being different today. (Famous last words, I realize, but go with me on this one.)
The GSM Association is certainly hip to these emerging markets, pushing its members to slide the wholesale prices of their cheapest handsets to under $30. But that's just a starting point: last summer Germany's Infineon announced a chipset that should cut the retail price on stripped-down phones to below $20. Texas Instruments and Philips are boasting similar designs, though neither expects sub-$20 handsets to be available until 2008 at least.
For now, then, the emerging markets must settle for bottom-of-the-barrel designs that hover around the $40 mark at best. Though Nokia seems to be making the most noise about serving the underserved—it has, for example, close to 60 percent of the Indian market—Motorola actually seems to be blazing the better trail in this regard. The C113A, for example, was arguably the world's first sub-$40 GSM handset. In fact, the company's entire C11x line is priced to move; both the C111 and C115, for example, retail for 36,000 Rwandan francs (c. $65) in Kigali, via South Africa's MTN (which handles networks in several sub-Saharan countries).
France's Alcatel is also in the low-cost sweepstakes with its OT 153, which reminds me of the Nokia 1100 minus the zazz. I expected it to be a pretty plain Jane entry, but it's actually somewhat feature rich. At the very least it has SIM-card memory, something that was actually lacking in a Samsung handset foisted upon my by Verizon Wireless some two-and-a-half years ago.
At this pace, there's really no reason why low-cost handsets shouldn't get appreciably cheaper by year's end, to say nothing of 2007. If the vendors are serious about their commitment to emerging-market consumers—something they claim is based on sound capitalist urges, rather than a yen to look like good, caring folk—then the economies of scale should kick in pretty quickly. The chipset problems already seem to have largely been ironed out, and the firmware shouldn't be too tough a hurdle; I'm by no means an expert, but it's tough to imagine there not being a sub-1,000 rupees handset available to Indian consumers by, say, this time next year.
Yet there are a couple of potential issues that bear notice. One is the somewhat schizophrenic nature of Nokia's stated strategy, which I'm sure goes for every other cellphone maker out there. Our beloved Finns have been making a big push in developed world to turn the humble handset into a veritable laptop—that was, I think, the whole point of that ad campaign featuring that chattering blonde with the bejunked trunk. (Sorry, had to whip out one of my favorite phrases once more.) It goes without saying that, barring a sudden tripling of the average income in China or India, the high-end devices remain a much more lucrative field—those margins are something to behold. So will the vendors really see through the $15 handset, knowing that it's gonna be a lot harder to recoup their investment? Stockholders demand results, and results are more easily obtained by pushing those 9300s.