The global Average Selling Price (ASP) for approximately 70% (4.8 billion) of active mobile phones will fall under USD 100 by 2015, according to a new report from Evalueserve. This can be attributed to the increased competition among manufacturers and focus of manufacturers on lower-middle income countries such as China and India that are cost-sensitive, but volume heavy.
Evalueserve estimates the global handset demand to rise to approximately 2.58 billion in 2015, with the replacement market accounting for approximately 94% of the gross demand. ’This change in buying behaviour will be driven by two factors: rapid commoditisation of the mobile handset with progressively reducing price points, and higher tendency to switch handsets, particularly in the mass market segment due to the low switching cost’, said Nitin Navish Gupta, Assistant Vice President, Information, Communication and Technology Practice, Evalueserve.
The dominant replacement market and lower ASP of mobile phones will drive handset manufacturers to improvise and innovate to stay competitive. According to an Evalueserve analysis, Nokia, the largest mobile manufacturer, recorded an approximately 39% fall in its ASP between 2005 and 2009. Similarly, Samsung’s ASP for mobile phones declined approximately 33% over the same period.
With the declining subscriber additions, the demand for replacement handsets is expected to become the key driver for the mobile market. Evalueserve estimates the share of handset replacement demand to the overall handset demand to increase from 73% (1.46 billion) in 2010 to 94% (2.43 billion) in 2015. Over the same period, gross handset demand is expected to increase at a CAGR of 5.1% from 2.0 billion in 2010 to 2.58 billion by 2015.
’Manufacturers are likely to churn out handset models faster than before, which will mean they will need to experiment more. Among other factors, the purchase will also depend on how seamlessly people can connect with the social networks and stream content. Also, manufacturers will need to come up with innovative business models to reduce customer acquisition cost and increase consumers’ loyalty to their product and service’, said Gupta.