The Ultra Low Cost Handset market

Publié le par Jean Arnal

The Ultra Low Cost Handset market (or ULCH; another acronym to memorize) is the cheapest segment in mobile handsets. Typically made with sub-$50 phones, this new segment was launched when GSMA invited vendors to manufacture low cost products for emerging countries. Surprisingly in appearance, the winners were western vendors (Motorola and Nokia) and not some new vendor coming from Asia. Why? In manufacturing a mobile phone, there is not only the costs of parts and labor, there is also royalty fee. So, a good ULCH portfolio means that the vendor holds patents and pay low or no royalty fees, and can produce in emerging markets. With these criteria, Motorola and Nokia dominate the ULCH market today, but other handset vendors will also be able to address the low margin ULCH market (Samsung, LG, and Sony Ericsson are interested). Smaller vendors will also try to enter the market in changing the rules. If they cannot compress royalty fees, they will lower other costs (marketing and distribution) by forming partnerships with mobile operators (i.e Huawei with Vodafone and China Unicom; ZTE with Reliance and Vodafone). So the market is becoming more competitive and war price is not ended. ABI Research expects that a dozen handset vendors will be shipping sub-$50 models by 2008 and that the ULCH market would reach 25% of the global handset market by 2011.

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