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Emerging markets will shape the smartphone world, new industry figures suggest

The mobile industry’s trade body has predicted that there will be six billion smartphone connections by 2020, accounting for two-thirds of the non-internet-of-things global mobile market at that time. And 80 percent of those smartphone connections won’t be coming from developed markets.

In order to interpret the GSMA’s Thursday report, it’s important to understand what the organization is measuring. Nearly a year ago, analysts noted that more than half of all mobile phones being sold at the time were smartphones, as opposed to basic or “feature” phones. The GSMA isn’t measuring sales or shipments here, but rather the connections to mobile networks that are being made – in other words, it takes into account the millions of older phones that remain in use.

One other major point: The GSMA study excludes machine-to-machine (M2M) connections, such as those made when a SIM-card-equipped vending machine tells a supplier that it’s empty. This is only comparing smartphones with basic and feature phones, and tablets, dongles and mobile routers – a reasonable condition, as everyone’s expecting the internet of things to prompt a crazy explosion in M2M connections that would throw these numbers completely out of whack. Got that? Right, let’s move on.

Where the growth is

The study predicts that there will be nine billion non-M2M mobile connections in 2020, largely driven by the proliferation of cheap – as in sub-$50 – smartphones in emerging markets. China will account for 629.2 million of these, followed by the U.S. on 196.8 million, Brazil on 141.8 million, India on 111 million, Indonesia on 95 million, and so on.

It’s worth noting that the developing world already accounts for two out of every three smartphones out there, and the GSMA is predicting that will rise to four out of every five. The Asia-Pacific region today accounts for half the global smartphone connections total, despite the fact that penetration is still below 40 percent. Smartphone penetration in sub-Saharan Africa is only around 15 percent today.

In other words, the growth potential in emerging markets is enormous, even though it’s slowing in developed markets, where penetration is already around 70-80 percent. According to GSMA Chief Strategy Officer Hyunmi Yang:

As the study released today shows, smartphones will be the driving force of mobile industry growth over the next six years, with one billion new smartphone connections expected over the next 18 months alone.

Big shift

What can we learn from all this? A few thoughts:

  • Asian hardware vendors like Xiaomi/Mi and Micromax, and service providers like [company]Baidu[/company] and [company]Tencent[/company], will become increasingly important and perhaps ultimately more important in global terms than U.S. or European vendors and providers. A lot of this depends on the ability of “western” vendors and providers to think beyond the needs of their local markets.
  • Unless [company]Microsoft[/company] starts coming out with sub-$50 Lumias, its decision to kill off most of Nokia’s low-end, non-Windows device lines looks short-sighted. Yes, the very low-end phones will survive (and will probably retain the valuable Nokia brand unlike the Lumias) but those are basic handsets, and all those people in emerging markets want smartphones. That almost certainly means they will go with variants of Android (unless Firefox OS surprises everyone with strong sales — where are those figures, anyway?)
  • And finally, an obvious point but one worth savoring: The rise of smartphones in emerging markets could do wonders for local economies and education, as they will be most people’s first computers and first connections to the internet. That’s awesome. On the other hand, it will also give much greater surveillance powers to autocratic regimes, which is decidedly not awesome.

In short, if you want to build a business with serious growth potential, think beyond developed markets.

2 Responses to “Emerging markets will shape the smartphone world, new industry figures suggest”

  1. About 75% of current smartphone shipments are in developing markets.Emerging markets are already shaping the smartphone world and China is creating trends. For example early this year or maybe a bit sooner, everybody in China started using 5MP front cams and that was contagious but the old phone makers are only now starting to catch up with the so called “selfie phones” and maybe in another year they’ll fullt catch up.
    The 50$ is misleading,they need to explain what a 50$ phone would be in 2020.
    You have now in China (and i guess 1 devices in India) at 5 inch 720p quad A7 at sub 100$ – btw since you mention Microsoft , their new 830 is 330 euros before taxes and it’s those specs plus wireless charging and a couple of more bits , they are developing cheap phones ,just selling them at 3 times more than some others, Moto G 2014 is in the same range of specs but at 180$.
    So in 2020 something like that , full mid-range (ofc with more contemporary hardware) should be 50$ in competitive markets (so markets not killed by carrier monopolies), if we don’t factor in the eventual rise of foldable/stretchable screens since those would shift the mix up in a big way.
    I am pretty sure (haven’t checked out the study) the 630 mil instal base in China and 111 in India are now or last yea not in 2020. Hell, India will have a few times more than that by 2020. Sales next year in India will reach 111 mil units.

    While at it, going back to the pricing disconnect , you got similar devices at sub 100$ in China and over 500 $ in Europe (including VAT).
    All the industry studies don’t factor it in at all. They go by price but that’s very misleading.
    Even in the Western Europe you got devices like the iphone vs Nexus 5 or Meizu MX4 at 2.5 times less. In China you got lots of high end devices at 300$ or even less but they get classified by folks like IDC as mid-range for being cheaper than 400$ and mid range devices worth 100$ that sell at 500$ elsewhere get classified as high end.
    It’s misleading and not painting an accurate picture of the market.
    You get fooled too by thinking 50$ in 2020 will be low end but that’s not the case. Firefox devices are already reaching 30$ in India.
    If you take the China pricing as a baseline, the same we used to do and still do with US pricing when it comes to PC parts, the picture is a lot different.
    In the end, phones are just pocket PC’s why would one cost 600-700 or even 1000$? Prices in the West need a 50% cut and it is about to happen, obviously only where the market is free to function.
    Do need to point out that Xiaomi is already bigger than a lot of phone makers with 15.1 mil units in Q2 and they , alongside Lenovo, are the most likely to overtake Apple in units maybe as soon as 2016.
    Micromax might become a giant but there is a long way to go, they had just 1.2B revenue in 2013 so pretty small for now.
    IDC recently had some projections for developing markets ASP if you are curious but i believe the decline will be steeper, although that doesn’t mean the mix will be lower.