Why the budget iPhone would throw the smartphone market into chaos

The buzz around the budget iPhone has grown deafening, with new reports about the device coming out on a weekly basis. This will be a product launch with a unique impact because of two trends that define the current smartphone market. First, the overall smartphone volume growth is projected to slow down from more than 50% in the fourth quarter of 2012 to about 36% in Q4 2013. Second, the Q4 2012 growth rates of the three biggest Asian smartphone vendors have remained superheated, with Samsung (005930) at 76%, Huawei at 89% and Sony (SNE) at 56%. What made this was possible was Apple?s slowdown to 29% growth during the past Christmas season and the notably weak year-on-year numbers from Nokia (NOK), ZTE and BlackBerry (BBRY).

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If the budget iPhone really arrives this summer, it will drop smack in the middle of the tension created by slowing global smartphone volume growth and the extremely ambitious volume growth targets of the largest Asian vendors. Obviously, Sony?s momentum has now improved even more with the smash success of the Xperia Z in Europe and Asia over the past two months. Samsung is about to make a substantial volume leap with the Galaxy S 4 launch in April. It is clear that Samsung, Huawei and Sony are all gunning for 50%-plus volume growth in 2013, even as total smartphone market volume growth is slowing down to 30%.

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The quarterly smartphone volumes of Nokia and Blackberry have dropped to 4 and 7 million units, respectively. The new smartphone leaders simply don?t have that much flesh left to rip from the haunches of the two fading champions. The new product lines of Nokia and BlackBerry are highly likely to stabilize their overall quarterly smartphone volumes in coming quarters close to the Q4 2012 level even if the sales are deeply disappointing. More likely, the combined Nokia and BlackBerry market share will actually climb a bit during the first three quarters of 2013. The period of making easy gains off the Nokia-BlackBerry volume dive is over.

That leaves a tough equation for the industry to deal with. The budget iPhone is likely to boost Apple?s year-on-year volume growth for the second half of 2013 to well above 40%, possibly over 50%, even if the model is priced at $350 in retail without subsidies. If it?s priced at or below $300, the volume boost could be a lot bigger. What would that mean for the rest of the field if the global smartphone volume growth continues its cooling, likely to around 30% during the second half of 2013?

Apple is in a unique position because all the other leading brands have made fairly aggressive moves to the budget category a lot earlier. Apple?s average selling price at around $650 is so high that it was initially regarded as impossible for a mass-market phone vendor back in 2007. There clearly is huge pent-up demand for a brand new iPhone retailing at below $400, particularly since the new iPhone model prices tend to top $700 in non-subsidized markets. Because non-subsidized markets make up more than 80% of the global handset markets, the budget iPhone is a big deal indeed.

A lot is now riding on the precise pricing of the cheaper iPhone: The difference between $275 and $375 in retail is fairly massive in markets like Brazil and Russia. But either sort of budget iPhone would completely reshape the Christmas season market share outlook, possibly spelling doom for a variety of mid-tier brands from HTC to LG.

This article was originally published on BGR.com

Source: http://news.yahoo.com/why-budget-iphone-throw-smartphone-market-chaos-151143634.html

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