50% of smartphones to cost less than US$150 by 2017

The smartphone market will begin to diverge and sales will become dominated by two poles - the low-end devices (priced below US$150) and the high-end devices (priced above US$250).

That is according to a new study from Informa Telecoms & Media, which predicts a major shift in market as 85% of sales last year were dominated by more expensive devices.

The reports says smartphones will find their market share shrinking to 33% in five years, with the low-end products expected to gain a larger amount of market share over the years to account for just over half (52%) of the smartphones sold in 2017.

“As the market develops, the supply chain will increasingly be divided between two camps – the innovators who will continue to introduce new features and high-performance components to the market place and followers who will take this innovation to the mass market in later years,” says Malik Saadi, principal analyst at Informa Telecoms & Media.

These changes will push some established manufacturers to reposition themselves in the new environment and come out with more effective handset-pricing strategies. Only a few manufacturers will have the ability to operate right across the market, the great majority will have to focus on particular segments to reduce cost and maximize margins.

Saadi says a number of established vendors, including Nokia, RIM, LG, HTC, Motorola and Sony, will find it hard to adapt to the new smartphone landscape as this could take them away from their core business, servicing the core smartphone market.

These players will have to make a strategic decision to either fight in the high-end segment, a market strongly monopolized by Samsung and Apple, or alternatively face stiff competition by assemblers and Chinese ODMs in the low-end segment of the market.

“In any case, these players will have to align their pricing strategy with market demand if they want to survive," he says.

"The new environment will make it hard for all vendors to achieve a balance between generating scale and maintaining decent margins."