Branded 'dumbphones' are being squeezed out, research shows

For years, Industry researchers have been saying that the drop in price for pocketable technology will cause more people to switch from simple "voice and text" phones to sophisticated smartphones. Now, after four years of smartphone sales growth in the neighborhood of 30-50% per annum (source: IDC, Gartner, ABI research) an explosion in smartphone sales is now taking place. However, in emerging markets, it's a different story.

Market analysts at Gartner Inc. today published their worldwide mobile phone sales numbers for the third quarter of 2010; and smartphones, which includes BlackBerry, iPhone, Android, Symbian, and Windows Phone devices, has grown 96% since the third quarter of 2009. These results sync very closely with the shipment figures published by IDC last week, which tracked an 89.5% annual growth in the number of smartphone shipped to retailers.

"Smartphone OS providers have entered a period of accelerated platform evolution, stimulated by more regular product releases, new platform entrants and new device types," said Gartner principal research analyst Roberta Cozza today. "Any platform that fails to innovate quickly --either through a vibrant multi-player ecosystem or clear vision of a single controlling entity-- will lose developers, manufacturers, potential partners and ultimately users."

Kevin Restivo, senior analyst of Mobility at IDC last week said, "The market transition to smartphones is proceeding at a brisk and unabated pace." IDC predicted 20% of all mobile devices shipped worldwide will be smartphones by the end of this year, the first time the category has ever reached this height.
The conversion to smartphones is taking place mostly in developed markets, and trends in emerging markets differ in an interesting way.

Consumers in markets such as India, Russia, Africa, and Latin America are often first-time mobile device buyers, and Gartner says these users are buying "white box" dumbphones. In fact, these unbranded devices now comprise 33% of the total mobile device market because of this, and combined are outselling all branded handsets. Market leader Nokia, which has consistently taken the largest chunk of the mobile device market, now has the second largest share behind the category Gartner calls "Others."

These "others" are typically made in China, have extremely low manufacturing costs, and can be offered to consumers very cheaply.

"We firmly believe this phenomenon will not be short-lived as we still see a continued need for non-3G devices. Although we have seen acceleration in sales this quarter, we expect an even bigger volume in the fourth quarter of 2010," Carolina Milanesi, research vice president at Gartner said today.

The near-term result looks like a serious squeeze on branded dumbphones. In established markets, consumers are replacing their feature phones with smartphones at a record rate; and at the other end of the spectrum, users in emerging markets are opting for cheaper "generic" phones in larger numbers than ever.