An Unexpected New Rival Poses Challenge to Smartphones

As Apple Inc. is counting on India’s emerging middle class to make up for slowing sales in other markets, an Indian government official announced last week that iPhones will start rolling off an assembly line in Bangalore by the end of April.

However, analysts are weary of the the iPhone conquering India, or any other emerging market right now.

This is because feature phones, an unlikely new challenger, are providing stiff competition to smartphones of all kinds. A new generation of feature phones is suddenly looking like a threat to Apple and its rivals – similar to the Nokia or Motorola you probably owned years ago, wWith simple handsets and small screens intended mostly for calls and text messages.

Feature phones have lately made some impressive gains for a technology long ago left for dead. Global shipments have grown for two consecutive quarters after years of almost continuous decline. For example, compared to a decline of 5.2 percent for smartphones, feature-phone shipments surged 32 percent year-over-year in the second quarter of 2016, which shows that growth in emerging markets has been especially impressive. Analysts say that trend is expected to continue for a few reasons.

Price is the most obvious advantage is. Compared to $19.30 for a feature phone, the average global price of a smartphone was $256 at the end of 2016. That doesn’t leave much in the way of consumer choice in emerging markets, where even educated urbanites typically earn less than $10,000 a year (in India, they average $5,385). But the booming secondhand market offers far better options than a smartphone even if a buyer has $256 to spare.

Battery life is another factor. Smartphones that have to be recharged each day can’t compete against feature phones that can now go for weeks on a single charge in many emerging markets, where electricity service can be intermittent.

Innovative hardware and services are also being created by feature-phone makers. Potentially appealing to hundreds of millions of illiterate or visually impaired buyers with low incomes are the ones introduced by Chinese-owned iTel which has a speech-to-text system. To enable customers to take advantage of lower rates when calling phones on the same carrier, or use separate lines for personal and business matters, India’s Zync has introduced feature phones with as many as six SIM card slots. a feature phone in the works that enables free calls over LTE networks, much as Skype does, for less than $20 is said to be in the possession of Reliance Jio Infocomm.

The development of mobile payment systems that require nothing more than text-messaging is perhaps the most important innovation. A user can transfers the money via text to friends or merchants after simply buying credit at a bank or service center. That can be a life changing service for the roughly 2 billion people around the world who lack access to basic financial services.

This year a slump in smartphone sales and upgrades is being predicted by some analysts in India as these new features in feature phones spells trouble for smartphone makers. Hoping to convert their considerable market share and brand recognition into upgrades, leading feature-phone brands have even started introducing cheap smartphones of their own.

(Adapted from Bloomberg)

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