Cheap Smartphones On the Rise, Expensive Soon to Fall

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Smartphones priced for less than $150 will account for half of phones sold in 2017, while those priced over $250 will shrink to one in three.

The expensive devices achieved a market share of 85 percent of total smartphones in 2011, according to Informa Telecoms & Media. But the company's new report revealed dramatic changes predicted to come for the smartphone market.

In addition, the average smartphone price will drop from $188 in 2011 to $152 in 2017, the report indicated. This drop stems from a need to balance the demand for entry-level smartphones in emerging markets and the demand for "super-smartphones" in developed markets.

The devices' average gross margin will likely remain at about 20 to 25 percent, and to remain profitable, many vendors will need to reduce operational costs, the analyst firm said.

“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 marketplace and followers who will take this innovation to the mass market in later years," said Malik Saadi, principal analyst at Informa Telecoms & Media.

Established vendors like Nokia, RIM, LG, HTC, Motorola and Sony will find it difficult to adapt to this new smartphone landscape because it could take away from their business with the core smartphone market, Informa said.

“In any case, these players will have to align their pricing strategy with market demand if they want to survive," Saadi said. "The new environment will make it hard for all vendors to achieve a balance between generating scale and maintaining decent margins."

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