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Cutthroat pricing to drag down smartphone sales

Posted: 03 Dec 2014 ?? ?Print Version ?Bookmark and Share

Keywords:IDC? smartphone? Android? iPhone?

The seemingly never-ending growth experienced by smartphone market is predicted to simmer down amid the fierce competition among manufacturers. Consequently, prices of the gadgets will decline in the next few years, indicated IDC.

A forecast by the research firm indicates smartphone sales of 1.5 billion units in 2015, a rise of 12.2 per cent from the current year's estimate. That would mean growth falling by more than half from the 26 per cent pace of 2014.

The sluggish growth is likely to continue through 2018, IDC said, with the average increase over the period just 9.8 per cent. Significantly, smartphone prices are likely to drop from an average selling price of $297 in 2014 to $241 by 2018.

Emerging markets such as India will see much lower smartphone prices, $135 in 2014 and $102 by 2018. Smartphone revenues "will be hard hit by the increasingly cutthroat nature of pricing," growing just 4.2 per cent over the same forecast period, according to IDC.

Smartphone shipment forecast

IDC expects global smartphone shipments in 2014 to reach almost 1.3 billion units.

"The impact of upstart Chinese players in the global market will be reflected in a race to the bottom when it comes to price," stated IDC analyst Melissa Chau. "While premium phones aren't going anywhere, we are seeing increasingly better specs in more affordable smartphones. Consumers no longer have to go with a top-of-the-line handset to guarantee decent hardware quality or experience. The biggest question now is how much lower can prices go?"

IDC said Google-powered Android devices will continue to dominate the market with 80 per cent of global smartphones and 61 per cent of revenues. Apple's iPhones will represent 13 per cent of units sold and 34 per cent of revenues, the report said.

"As shipment volume slows, we expect greater attention to shift toward value trends," said IDC analyst Ramon Llamas. "Apple's approach with premium pricing ensures a growing portion of overall revenues despite its declining market share."

Because of Android's dominant position, IDC said new operating systems such as Tizen and Firefox will have difficulty gaining a foothold and "must bring a radically different appeal to gain any significant traction."

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