Cheap mobiles, big profits

MOBILES

It's difficult to imagine life without mobile phones. And its ubiquity is showing up in sales figures.

Cellphone makers have reportedly shipped more than a billion handsets for the first time in 2006, which indicate a 20 per cent increase. But the star attraction remains ultra low cost (ULC) mobile phones which continue a healthy growth. Expected to reach 48 million units in 2007, the ULC segment will be a sweet spot for most vendors.

According to Strategy Analytics, nearly 20 million ULC handsets were shipped in 2006, with Motorola continuing to dominate the sector with an almost 80 per cent market share.

The news that Sony Ericsson will start manufacturing low-end colour screen and music playing mobile handsets in India through an agreement with its global outsourcing manufacturing partners, Flextronics and Foxconn, was not greeted with any surprise. "The phones, intended for local distribution, will not only offer a competitive price, but will also include features customised for the Indian market, such as local content," the company announced.

Sony Ericsson joins Nokia, Motorola and Samsung, who have already started shifting product development and manufacturing to India. "Besides there being a huge number of potential buyers, India is a good market for mobile phone sales because the majority of Indians prepay for their phones," says Sudhir Gupta, advisor (mobile networks), TRAI at a recent seminar.

Encouraging numbers from various industry reports have pegged that one in every four mobile phone handsets shipped worldwide in 2011 will cost under $20 (Rs 940).

The ultra low cost handset market in India is currently dominated by Motorola and Nokia, but other handset manufacturers like LG Electronics, BenQ, Samsung, Philips, Haier, Fly, Spice and Kyocera are also introducing handsets for this segment. India is expected to be the biggest market in the next five years, growing from 9 million handsets in 2006 to 116 million handsets in 2011.

"This demand gives mobile operators and manufacturers a quick route in emerging markets," states an ABI Research report adding, "The downside is that they are manufacturing and shipping a greater proportion of low-cost handsets, which can adversely affect their profits."