Taipei, Friday, December 19, 2014 08:00 (GMT+8)
light rain
Taipei
16°C
Is a US$25 smartphone possible?
Michael McManus, DIGITIMES, Taipei [Tuesday 25 February 2014]

Mobile World Congress (MWC) kicked off with a bang, with Mozilla announcing a US$25 smartphone built around a turnkey solution that features silicon from China-based Spreadtrum and software from Firefox.

According to a Mozilla press release, Spreadtrum and Mozilla have now completed the integration of Firefox OS with several of Spreadtrum's WCDMA and EDGE smartphone chipsets, including the SC6821, unveiled by Spreadtrum as the industry's first chipset for a US$25 smartphone.

So the key to the solution is the SC6821, which Spreadtrum stated is "designed with a unique low memory configuration and high level of integration that dramatically reduces the total bill of materials required to develop low-end smartphones." Mozilla added that with this chipset, handset makers will be able to bring to market smartphones with 3.5-inch HVGA touchscreens, integrated Wi-Fi, Bluetooth, FM and camera functions, the advanced phone and browser features of Firefox OS, and access to an ecosystem of web and HTML5 applications.

With a clearer picture of the specs Mozilla envisions for a US$25 smartphone, I approached Digitimes Research Analyst Luke Lin to ask if he thought it was possible to deliver such a product to the market at this time. According to Lin, the simple answer is that it would be "impossible" to see a US$25 Firefox phone hit the shelves this year, unless operators are willing to provide subsidies.

Lin explained that currently, the absolute lowest smartphone BOM in China is estimated to be around US$22 (and most are significantly more than that) and that manufacturing costs are highly unlikely to go below US$20 this year, which would be the cost needed to deliver a US$25 smartphone to end users. The cost would need to get to US$15-20 FOB in order to get a selling price of US$25, Lin said.

In terms of Spreadtrum's claims it has produced a level of integration and memory requirements that can reduce the BOM cost significantly, Digitimes Research Analyst Anthony Chen commented that Spreadtrum's solution is no more integrated than any other integrated solution on the market so there is no clear advantage there. And as for memory, the cheapest and smallest memory modules (ROM and mobile DRAM) for smartphones in China run about US$5 for a configuration of 256MB ROM and 256MB of mobile DRAM, and Chen highly doubts the Mozilla solution could run with a lesser configuration than that.

One other argument being offered as to why Spreadtrum could offer lower pricing than competitors is that the China government has a stake in the company. The logic is that an edge in pricing could help Spreadtrum better compete with Taiwan-based MediaTek and US-based Qualcomm.

Chen responded to the suggestion by pointing out that such a statement is not really an argument. It's merely speculation. Moreover, Chen noted that Spreadtrum's cheapest products currently sell in the US$3-4 range, and he doesn't see much chance for the price to be reduced significantly, with subsidies or without.

While it is true that BOM costs are always falling, Lin and Chen agreed that component makers are much more likely to be squeezed in the higher-end segments, where they have margins. At the bottom of the market, the component makers are not really making any money. As a long term strategy for the low-end of the market, they would much prefer to provide improved specs at the same price rather than cut prices, Lin explained, while adding that it is unlikely that the BOM would drop much further at the bottom end of the market, as it is already close to US$20. Therefore, while prices may drop a little, Digitimes Research does not expect prices to drop all that much in the near future.

Another perspective was offered by Digitimes Research Analyst Jason Yang, who stated that if there is any component that could influence the low-end smartphone BOM at this point, it was the touch panel, not the application processor. Yang indicated that currently the touch panel module, with LCD display, accounts for the largest portion of the BOM, at around US$7-8 for the cheapest modules. Yang did state that he believes the price may drop this year, but not enough to bring the overall BOM cost of the cheapest phones to below US$20.

So, if ultimately the announcement was all about Mozilla driving the launch of a US$25 smartphone, Lin doubts that this will happen this year or anytime soon. Based on the current cost structure, Lin believes Firefox models priced in the US$60-80 are more likely to appear in 2014. Of course, users may be able to find spectacular deals and price cuts, but such a situation would more likely be inventory clearance or something similar, not a mainstream price point.

However, if this announcement is not about Mozilla driving the market to low-cost smartphones and is more about a trend where emerging markets will become flooded with cheap smartphones, then it should be noted that this is a process that is already underway.

Currently in China, entry-level smartphones - mostly white-box but even some brands - are already selling in the US$50 range. And these smartphones are not just being shipped to the domestic market. China vendors exported about 30% of their smartphones in 2013 and that proportion is forecast to rise in 2014. According to Digitimes Research data tracking smartphone shipments by vendor and the related market breakdown, the non top-10 segment (which is dominated by Greater China vendors and white-box players) accounted for 12% of global smartphone shipments in 2012, 21% of the global market in 2013, and Digitimes Research forecasts the share will rise to 25.6% in 2014.

So the flow of cheap smartphones from China going to emerging markets has already started and the shipments are steadily increasing, it's just that the devices cost a bit more than US$25 and almost all of them feature Android as the OS.

Realtime news
  • NAND flash contract prices see modest drop in 1H December, says DRAMeXchange

    Bits + chips | 9h 57min ago

  • Global storage market to reach US$38 billion in 2014, says Western Digital

    IT + CE | 9h 58min ago

  • SMIC builds Qualcomm Snapdragon 410 chips using 28nm

    Bits + chips | 10h 1min ago

  • Globalfoundries and Cadence deliver first SoC enablement solution featuring ARM Cortex-A17 processor in 28nm-SLP process

    Bits + chips | 10h 2min ago

  • Taiwan science parks January-October total revenues up 3.61% on year, says MOST

    Bits + chips | 10h 4min ago

  • Unitech expands HDI-board capacity

    Bits + chips | 10h 5min ago

  • PV equipment book-to-bill ratio stays below parity in 3Q14, says SEMI

    Bits + chips | 10h 20min ago

  • Xiaomi smartphone finding it difficult to step out of China

    Before Going to Press | 10h 31min ago

  • Notebook orders from Russia decreasing, says Taiwan ODMs

    Before Going to Press | 10h 32min ago

  • ACES Electronics invests in NTGEC to tap China automotive connector market

    Before Going to Press | 10h 33min ago

  • Japan smartphone panel makers bring price competitive pressure on China and Taiwan makers

    Before Going to Press | 10h 34min ago

  • SMIC builds Qualcomm Snapdragon 410 chips using 28nm

    Before Going to Press | 10h 34min ago

  • Some China PV module makers replace Taiwan-made solar cells with Southeast Asia-made models

    Before Going to Press | 10h 34min ago

  • LED light bulb prices fall in Europe, China markets

    Before Going to Press | 10h 36min ago

  • NAND flash contract prices see modest drop in 1H December, says DRAMeXchange

    Before Going to Press | 10h 37min ago

  • Global Ultra HD TV penetration to rise to 14.2%, says WitsView

    Before Going to Press | 10h 37min ago

  • Demand for 8-inch fab equipment rises

    Before Going to Press | 10h 38min ago

  • PV equipment book-to-bill ratio stays below parity in 3Q14, says SEMI

    Before Going to Press | 10h 38min ago

  • Taiwan market: LG launches 42- to 55-inch smart digital signage

    Before Going to Press | 10h 39min ago

  • Digitimes Research: Top-3 China based server vendors may ship 2 million units in 2015

    Before Going to Press | 10h 39min ago

  • Taiwan market: FET expects 4G user base to exceed 1.0 million at end of 2014, says president

    Before Going to Press | 10h 40min ago

  • US final anti-dumping, anti-subsidization taxation excludes solar-grade wafers

    Before Going to Press | 10h 40min ago

Pause
 | 
View more
MSI GTX 900 GAMING series
Analysis of China revised domestic semiconductor industry goals
Greater China touch panel shipment forecast through 2015
  • Wireless broadband developments in Southeast Asia markets

    As of 2013, the 10 ASEAN nations had a total of over 700 million mobile subscriptions, with the CAGR from 2003-2013 reaching 24%. This Digitimes Research Special Report analyzes the various mobile broadband markets in ASEAN and looks at the respective trends in 4G LTE development for those markets.

  • Greater China touch panel shipment forecast through 2015

    This Special Report provides forecasts through 2015 for Greater China touch panel shipments with breakdowns based on technology (glass, film, resistive), application (smartphone, NB and tablet) and by firm.

  • 2014 global tablet demand forecast

    This report analyzes the main players, their strategies and shipments forecasts for 2014, as well as other factors contributing to either growth or decline in various segments within the tablet market, with a particular focus on Apple, Google, Samsung, and Microsoft, along with whitebox vendors.