Smartphone prices set to tumble

Increased competition should lead to cheaper handsets as market booms

1 Feb 2010

Consumers could see a plethora of handset bargains as smartphone manufacturers enter a price war, according to analysts.

Booming demand for new, cheaper smartphones helped fuel a recovery in the overall handset market late last year, according to researchers, but rivalry for a piece of this lucrative business is set to turn fierce as new vendors enter the fray.

“The smartphone market will become ultra-competitive in 2010,” said analyst Neil Mawston from research firm Strategy Analytics. “The smartphone wars will be good news for consumers, but the fierce competition will inevitably place downward pressure on vendors' pricing and margins.”

South Korean firms Samsung Electronics and LG Electronics, are planning to sharply increase smartphone sales, while new players like Huawei and Dell are strengthening their offerings.

“An influx of new players, an oversupply of devices and aggressive pricing will strain profit margins,” said CCS Insight analyst Geoff Blaber.

Handset manufacturer HTC said last week it would be one of the first to suffer from increasing competition when it forecast a decline in gross profit in the first quarter of 2010.

"Those with a tightly integrated device and service offering - like Apple and RIM - will be the winners in 2010," said Blaber.

Strategy Analytics said the smartphone market grew 30% year-on-year in the last three months of last year to 53 million phones, the highest ever.

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