Full Featured Cell Phones Going the Way of the PDA

Functionality, popularity, and the economy are altering the cell phone landscape. We see a divergence in the mobile phone market – a movement away from Feature Phones to Smartphones on the high end and plain voice phones on the low end, particularly in third-world countries.

As a result, the market for Feature Phones will decrease from 59.4% of cell phones in 2008 to 33.6% in 2013, as shown in the chart below.

The Full Feature phone uses a proprietary operating system typically interfacing to Sun Microsystems’ Java (Nasdaq:JAVA) or BREW, while the Smartphone has a more advanced operating system and corresponding platform for application developers. We will see a movement to advanced operating systems so that feature phones will essentially have all the features of a smartphone and will lose its moniker.

Qualcomm's (Nasdaq:QCOM) BREW technology, for example, allows a user to download and use applications such as ringtones, music, games, applications, and use instant messaging on a phone.

We anticipate that the smartphone market will be huge, growing at a CAGR of 23.0% between 2008 and 2013. Shipments will increase from 14.4% of the cell phone market in 2008 to 32.1% in 2013.

The low-end voice phone market will benefit from the migration of feature phones to smartphones on the high end. As a result, the market for low-end voice phones will increase from 26.2% of the total cell phone market in 2008 34.3% in 2013.

Features of a low-end phone are durability and ease of use, designed with developing countries in mind. It has good battery life and reception. It is a simple phone with a keypad to type numbers for users not interested in games, or a camera. Nokia (NYSE:NOK) refers to its line of low-end phones as “talk and text.”

click to enlarge

Comments

[Yagottabe Kidding]

If a phone sells for $50 does it matter if we call it a dumb phone, feature phone, or smart phone?

It's still a $50 phone.

The question is not (and should not be) whether the "smart phone segment" is dramatically increasing, but whether the TOTAL phone market is increasing.

Because a $50 phone is a $50 phone no matter what else we call it.

2009 Oct 26 08:27 AM

[onlythetruthhere]

In Philly when one needs money quickly a Fifty Dolla phone of any type is worth about $2.75


On Oct 26 08:27 AM Yagottabe Kidding wrote:

> If a phone sells for $50 does it matter if we call it a dumb phone,
> feature phone, or smart phone?
>
> It

2009 Oct 26 05:20 PM

[TheBoots]

Actually the upfront cost of the phone is only part of the economics. The call and data plan, and contract terms make up the rest. there really is no "free lunch" per se.

2009 Oct 27 06:17 AM

[grayhair]

Your chart is not labeled well. My guess is that the Smartphone should have a little 'green box' as a label instead of a 'red box'. Also, logically, you should have had the chart ordered with feature complexity rising on the vertical scale. Low end at the bottom of the chart, smart phone at the top, and 'feature phones' being squeezed between them in the middle.

Other than that, I concur. The middle segment will shrink as the component costs for smart phones drop. You will have a two tier market, voice/text and smart phone. They middle will get pinched out of existence.

2009 Oct 30 10:17 AM