Although research firm IDC is predicting the global smartphone market will continue to grow by leaps and bounds in the years ahead, the firm is also cautioning that that growth won't occur through sales of expensive phones. Instead, IDC is forecasting the average smartphone will cost just $265 by 2017.
"The key driver behind smartphone volumes in the years ahead is the expected decrease in prices," Ramon Llamas, research manager with IDC's Mobile Phone team, said in a release. "Particularly within emerging markets, where price sensitivity and elasticity are so important, prices will come down for smartphones to move beyond the urban elite and into the hands of mass market users. Every vendor is closely eyeing how far down they can price their devices while still realizing a profit and offering a robust smartphone experience."
IDC predicted that worldwide smartphone shipments will surpass 1 billion units this year, an increase of 39.3 percent over last year. The firm further expects the segment to enjoy a compound annual growth rate of 18.4 percent from 2013 to 2017, reaching 1.7 billion units in 2017.
"The game has changed quite drastically due to the decline in smartphone ASPs," Ryan Reith, program director with IDC's Worldwide Quarterly Mobile Phone Tracker, said in a release. He added that most industry watchers expected the next billion wireless users would come online via feature phones, but due to the dramatic decrease in smartphone selling prices, those next 1 billion users will likely tote inexpensive smartphones instead.
It's no secret that this trend will drag on the world's smartphone and chipset suppliers. Indeed, Qualcomm CEO Paul Jacobs recently warned of "solid growth" next year, "but at a lower rate than what we delivered in the last few years." The warning is largely due to an expected increase in sales of cheaper phones in emerging markets.
Samsung executives have predicted a similar shift: "In the future, we expect emerging markets will drive smartphone volume growth," Samsung Electronics co-CEO JK Shin said in November. "That is already happening, China and India are the first- and third-largest smartphone markets."
Investors continue to worry over how this trend will affect high-end smartphone makers like Apple (NASDAQ:AAPL) and Samsung. The companies have become the world's largest smartphone vendors largely through sales of expensive, feature-packed phones. But as established markets like the United States and the United Kingdom become saturated with those phones, demand for high-end phones could slow in the coming years.
In response, Samsung has said it will focus more of its attention on the low-end segment. Apple, however, remains squarely focused on the high end. The company earlier this year had been rumored to be preparing a low-cost version of the iPhone for emerging markets, but the company in September began selling its new iPhone 5s and 5c at essentially the same price points as last year's models.
- see this IDC release
Qualcomm's revenues jump 33%, but firm warns of coming slowdown
Samsung bullish on high-end, LTE Advanced smartphones, but puts focus on software
Analysts: Huawei booms to No. 3 worldwide smartphone maker with P6, G610 success