Are Sub-$30 Mobile Phones Worth It?

By: STEPHEN LAS MARIAS, EDITOR
( 1 Jul 2007 )

Wireless Design and Development Asia recently spoke with Dr. Folkert Wierda, Director, Business Development, and Patrik Åhgren, Vice President, Sales and Business Development, of the Personal Communications Group of Elcoteq SE, regarding the trends and outlook of the mobile phone design and industry. Elcoteq, the largest European EMS provider, mainly focuses on terminal products—personal and home communications—and communications network equipment. The company, claimed to be the first EMS provider to manufacture a box build digital mobile phones in 1997, includes RIM, Sony Ericsson, Motorola, Philips, Nokia, Huawei, Siemens and NEC among its clients. Excerpts:

What can you say about the future of handset design?
Dr. Folkert Wierda: What you see in the handset business over some time is that most have these waves of technical and functional innovations, and then consolidation with a lot of pressure on costs and prices. If we look at the 3GSM Conference in Barcelona last March, the amount of innovation was actually quite limited. Probably, one of the things that impressed me most was the further development of very thin phones¡ªthey are really getting exceptionally thin.
What we know from analysis and also discussions with our customers is that, at this moment, a lot of emphasis is on getting affordable, low-cost 3G phones in the developed world. If you look at the current 3G products, you cannot really browse like you would do at home with your PC. So in the background, operators are working on making pipelines for getting the mobile internet really accepted. That is something that will happen in the coming two to three years.

Patrik Åhgren: What we see is that there will be drastic changes before 3G handsets actually get an upper hand on the 2G and 2.5G—quite a surprising slow development, but obviously because of the price treatment. I this is also why the operators now are pushing so hard in getting low-cost 3G handsets out there in order for them to recover their new investments faster.

Please give your comments on the sub-$30 mobile phone development.
PÅ: With respect to emerging markets, what we see is that the requirements for mobile handsets go up very fast. Color displays are required even by the people with very small purse. They do require polyphonic tones; they do require more functionality. I believe that the ideas and concepts that we still have maybe 12 months ago about being able to do the ultra-low cost phones by taking out displays will not work. The emerging markets want real mobile phones, they are excessively aware of the developments. It just means that our industry needs to develop real mobile phones at lower costs but not at the expense of functionalities.

FW: The people with a small purse in India and China are spending an excessive part of their income on a mobile phone. Their demands are very often even higher than in more mature markets with respect to reliability of the phone, and with respect to what they can do with it. So that is the trend that we see at this moment.
The purchasing power and purchase willingness of entry markets with those consumers should never be underestimated. The ultra-low cost mobile phone is certainly addressing a very important segment, but its success is yet to be seen at this point. In some markets, they have gotten well with the reception, but you also hear customers and companies not being so excited about it.

How do you see the mobile phone market in Asia perform in the next several years?
PÅ: We went through some country analysis according to penetration rate in mobile phone users and subscription. If you exclude India and China, you are looking at about 30 to 50 percent penetration rate in most countries. Growth will definitely still come from India and China. India is of course a shivering powerhouse in this particular area—they are adding about 6 million users a month. They definitely have a lot of way to go there given the population, the total pool of potential customers in the country.
When it comes to Asia, we will definitely see India will driving the growth, and China will remain to be very strong. The other countries, however, remain more than penetrated at this point. If you look at countries such as Malaysia, they are close to 78 percent or even 85 percent in terms of penetration. So there's not that much to gain there. Meanwhile, we are starting to see that the replacement rate is coming unexpectedly strong. Previously, the mobile phone market was expected to slow down due to the high penetration, but it turned out that the replacement rate now is definitely picking up. It is a matter of time before we will see the same trends starting to happen in Asian countries, which have now in the past couple of years built up penetration and will start soon to also focus on the replacement market.

Everybody is talking about next generation networks. How does Elcoteq address this trend?
FW: WiMAX is important; we see a very aggressive ramp up of WiMAX activities, and we are in that very actively. In addition, we are seeing the further build up of 3G and 3.5G networks.
PÅ: We believe that WiMAX will come out very fast. It will not push away the current 3G or future 3.5G, but it will be working in combination. WiMAX will become quite an interesting feature that we are looking forward to.