Taipei, Thursday, October 8, 2015 05:39 (GMT+8)
mostly cloudy
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.

Topics: Page 2

Realtime news
  • Yageo, Chilisin report increased September revenues

    Bits + chips - Stockwatch | 7h 21min ago

  • Taiwan LCD driver IC firms look to post more than 10% revenue decreases in 4Q15

    Bits + chips | 7h 22min ago

  • Macronix, Winbond post flat September revenues

    Bits + chips - Stockwatch | 7h 23min ago

  • KYEC posts record 3Q15 revenues

    Bits + chips | 7h 24min ago

  • Inventec enjoys revenue growth in September

    IT + CE | 7h 25min ago

  • Headset maker Merry sees revenues up in September

    Mobile + telecom - Stockwatch | 8h 59min ago

  • Yen Sun to take cautious approach about Volkswagen emissions scandal

    Before Going to Press | 7h 37min ago

  • Compal to establish healthcare business unit in 2016

    Before Going to Press | 7h 39min ago

  • PCB maker Compeq sees revenues reach new high in September

    Before Going to Press | 7h 40min ago

  • Taiwan makers show revenue declines for 3Q15

    Before Going to Press | 7h 40min ago

  • Fingerprint sensors set to see growing adoption among Android phones

    Before Going to Press | 7h 40min ago

  • Holtek showcases 32-bit MCUs for IoT

    Before Going to Press | 7h 41min ago

  • Maanshan Electronics Expo to open on October 30

    Before Going to Press | 7h 41min ago

  • Microsoft Surface Book may bring more pressure to notebook vendors

    Before Going to Press | 9h 16min ago

  • Microsoft launches 3 Windows 10 smartphones

    Before Going to Press | 9h 17min ago

  • Taiwan market: HTC unveils mid-range Desire 728 dual-SIM

    Before Going to Press | 9h 18min ago

  • Tianma to be main supplier of panels for new Asustek notebooks

    Before Going to Press | 9h 34min ago

  • AUO announces management adjustments

    Before Going to Press | 9h 35min ago

  • GLT reports record-high revenues for 3Q15

    Before Going to Press | 9h 59min ago

  • Taiwan sees decreased September export value, says MOF

    Before Going to Press | 10h 7min ago

  • Digitimes Research: Nichia tops LED packaging firms in 1H15 revenues

    Before Going to Press | 10h 8min ago

  • Yageo, Chilisin report increased September revenues

    Before Going to Press | 10h 8min ago

  • Macronix, Winbond post flat September revenues

    Before Going to Press | 10h 9min ago

View more

The Big Fund - China's next step to becoming a global semiconductor leader

RESEARCH EXTRAS | Sep 16, 17:49

China has been solidifying its semiconductor industry policy objectives through the release of the "National IC Industry Development Guidelines" in June 2014 and "Made in China 2025" in June 2015, with one key financial support program being the National IC Industry...

Display panels for wearable devices: Market overview and forecast through 2017

RESEARCH EXTRAS | Jul 23, 12:15

The wearables market is a growing focal point for many vendors and players in the display panel supply chain. This Digitimes Research Special Report looks at developments in panel applications in the wearable industry, with a specific focus on panel makers in...

Taiwan LCD TVs – 2Q 2015


Taiwan-based LCD TV makers are seeing improving shipments. Among them, Foxconn Electronics (Hon Hai Precision Industry) will have the strongest shipment growth in the second half due to procurement orders from Mexico.

Global tablet market – 2Q 2015

GLOBAL TABLET | Aug 21, 12:11

Digitimes Research saw global tablet shipments fall to 45.76 million units in second-quarter 2015, showing a 10% decrease on quarter and representing more than a 15% decrease on year.

China smartphone market and industry – 2Q 2015

CHINA SMARTPHONE | Aug 18, 15:33

Smartphone sales in China no longer show any significant momentum for growth as the fast maturing market now increasingly relies on replacement demand from existing users.

The Big Fund
Trends and forecasts for the China FPD industry, 2014-2017
Demand and supply trends in the global sapphire industry, 2014-2015
  • 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.

  • 2015 global tablet demand forecast

    This Digitimes Research Special Report provides a 2015 forecast for the global tablet market and analyzes the strategies of key market players such as Google, Apple, Intel, and Microsoft.

  • 2015 China smartphone panel trend forecast

    This Digitimes Research Special Report analyzes the strategies of key China-based major panel makers BOE, Tianma and IVO for attacking the different market segments through technology and pricing, and their relationship to local vendors Huawei, Lenovo, ZTE, Xiaomi and Coolpad.