Affordable Smartphones Key to Continued Growth for Mobile Giants

by Matt Klassen on April 30, 2013

While both Apple and Samsung have established a dominant position in the wireless market thanks to their respective feature rich, cutting edge smartphones, as the most recent quarterly results for both companies show, such dominance is no longer enough.

In fact, while combined Apple and Samsung control more than half the smartphone market and almost all the revenues, the insatiable demand for continued growth and success means that both companies will have to change their strategies if they want to see their respective stock prices continue to rise. To that end, the reality for both smartphone behemoths is that if they want to get bigger, they’re going to have to get cheaper, as in producing affordable smartphones geared towards the rest of the two thirds world.

But reaching the affordable lower end of the smartphone market is easier said than done for Apple and Samsung, particularly given the fact that the bottom of the market is already packed with savvy competitors who know how to build smartphones on the cheap. That means that despite their respective successes in the high end market, there’s no guarantee that Apple or Samsung will be able to make their presence felt along this new frontier.

The problem for companies like Apple and Samsung is that the markets where their respective high end smartphone dominate are already almost completely saturated, meaning there’s no new customer base to spur continued growth. With shareholders clamouring for such sustained growth, it means such companies need to find other markets, and unfortunately most of the world simply can’t afford the products Apple and Samsung are selling…at least not in their current incarnation.

So enter the affordable smartphone, the much talked about next frontier of the smartphone world; a frontier, unfortunately for both companies, which is already well settled by the local indigenous smartphone population. In fact, many have already speculated that companies like Apple and Samsung will struggle mightily to migrate their respective successes in the high end market to the budget end of the spectrum, simply because companies like Huawei, ZTE, and mainstay Nokia have spent so much time and energy learning how to play the quantity over quality game, although most still struggle with the razor thin profit margins associated with the budget market.

I echo the concerns of many analysts over the impending struggles both Apple and Samsung will face in this new affordable lower end market, simply because I’ve witnessed the struggles of companies trying to drive the other way up that two-way street.

Companies like those mentioned, particularly Nokia, have built technological empires are the premise of getting phones into everyone’s hands at rock bottom prices, allowing even some of the poorest or least developed communities in the world to access rudimentary wireless service. But those companies, again looking primarily at Nokia, have struggled to traverse the gap between budget and high end smartphones, ultimately leading these companies to struggle to grab a piece of the substantially larger revenues associated with the high end market.

In the end, while the lower end of the smartphone market is ripe for further development, don’t think that Apple and Samsung will immediately see results–that is if they even decide its worth their time to grow their business by changing their entire revenue focus and pursue this budget demographic– as there’s no evidence, not yet at least, that these companies have the necessary business acumen or global awareness to even reach the markets where people are only now reaching for their first mobile phone.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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