In tech media, it’s always the big, whizz-bang devices that tend to garner the most attention from enthusiasts. After all, they tend to have a disposable income and they are at the forefront of mobile technology. They're also the loudest for complaints or praise, dominating the conversation.
The Nokia Lumia 1020 is a perfect example, coming in at nearly $700 without a subsidy and $299 with—most people can’t afford it, but it reaps the headlines. And people still want it to have better, more expensive specs. Meanwhile, mid to low range devices are met with derision and scorn as people who are in well financed, established markets chime in on a device not aimed at them. We even see it here on this site, where people just want quad-cores, 1080P displays and envelope-pushing gizmos, yet they lament devices like the Lumia 625.
But the reality of the market is that smartphone prices are dropping favoring devices like the Lumia 52x and Lumia 62x or Huawei with their Ascend W1 and W2. According to the IDC, the average smartphone price has plummeted from $450 to just $375 in the last year. That trend is expected to continue with the average price headed to $350 and lower in 2013 and that directly cuts into the profit margins of Apple and Samsung, who often bet on high-end smartphones like the iPhone 5 or Galaxy S4 (neither of which are cheap).
Michael Morgan, an analyst at ABI research, was quoted by Bloomberg saying
“The days of great growth in the high end of the market are gone…It’s the Chinese companies who know how to survive on tiny margins that are ready for the fight that’s about to ensue.”
In response to this, Apple is expected to release a lower-priced iPhone later this year in addition to their high end version. The problem here though is Apple is reacting to the market instead of anticipating, losing valuable time and ceding ground to other manufacturers. There’s no doubt that companies like Huawei and Lenovo are starting to take a bit out of the smartphone business, but Apple so far has not had a response.
Likewise, HTC has been doing the opposite: trying to be a high-end premium manufacturer akin to Samsung and Apple, chasing the more lucrative “flagship” status with their One. While that device has received very positive press coverage and reviews, consumers are still choosing Samsung over HTC when Android is the option. The problem here, as noted by BGR, is HTC does not have much in response for the low-end market anymore, as they sunk a lot of resources to get behind the One, consolidating their offerings (even the Mini is still not low enough). With Samsung and Nokia positioned against them, HTC is now caught in a dangerous situation.
Nokia and The Next Billion
Speaking of Nokia, the company has been very forthright about reaching “the next billion”, referring to emerging markets who are graduating from simple feature phones to full smartphones. This is why Nokia keeps hammering at devices like the Lumia 520, Lumia 521, Lumia 620 and tomorrow’s Lumia 625—it offers them an area where they can legitimately compete without Apple breathing down their necks.
Just today, AT&T announced the Lumia 520 for a no-contract pre-paid price of $99. That’s $99 for a brand new smartphone, flat in the US. Likewise, MetroPCS was also shown to be getting T-Mobile’s Lumia 521, presumably at a similar price point. While these devices don’t get a lot of admiration, they are the next big thing driving the industry (plus, we actually really like these phones).
The good news here though is Nokia is not reacting to the market, but rather expecting it. That means devices like the Lumia 52x can flourish at the low end for a few months, giving some respite before Apple drops their $300 device in the fall. And if Bloomberg is right, we could see the industry start to cannibalize itself, akin to what happened to the PC market years ago when costs plummeted and there was (and still is) a race towards the bottom.
So, dear reader, next time Nokia or Huawei announce “another” low cost, premium Windows Phone, don’t roll your eyes but rather rejoice at the forward thinking of these companies. Chasing the high-end smartphone market, while necessary to a certain extent, should not and cannot be their only focus. Continue to enjoy the Lumia 920, Lumia 1020 and whatever unicorn phone comes out in the future, but remember, it’s the Lumia 520 and Huawei Ascend W1 that are driving this industry now.