The world markets have embraced the notion that open-source enables products that cost less than the proprietary vendor equivalent. Granted, some markets are more price sensitive than others. The smartphone market is a case in point.
The perception that an Apple iPhone design is worth the premium price simply doesn't translate to the majority of emerging markets, where "value" is more likely to drive market share growth for the leading vendors.
According to the latest mobile phone forecast from the International Data Corporation (IDC), more than 1.25 billion smartphones will be shipped worldwide in 2014, representing a 23.8 percent increase from the 1.01 billion units shipped in 2013.
Looking ahead, total volumes are forecast to reach 1.8 billion units in 2018, resulting in a 12.7 percent compound annual growth rate (CAGR) for the 2013 – 2018 forecast period.
Emerging markets have accounted for more than 50 percent annual smartphone shipments dating back to 2011, so it is no surprise that they have been crucial to the growth of the overall market.
However, up until 2014, mature markets have consistently delivered double-digit year-on-year growth. In 2014, IDC expects mature markets will slow to just 4.9 percent growth, with emerging markets continuing to soar at 32.4 percent -- pushing the total market up 23.8 percent.
"The smartphone market, which has experienced runaway growth over the last several years, is starting to slow. Mature markets have slowed considerably but still deliver strong revenues with average selling prices (ASPs) over $400. Meanwhile, many emerging markets are still barreling along, but with ASPs of less than $250," said Ramon Llamas, research manager at IDC.
The key for vendors now is to maintain a presence in the higher-margin mature markets, while establishing a sustainable presence within the fast-growing emerging markets. To enable this strategy, operating system companies are partnering with OEMs to provide low-cost handsets.
In 2014, IDC expects emerging market smartphone volume to grow to 920.8 million units accounting for 73.5 percent of all volume shipped. The catalyst here continues to be Google Android devices, which are expected to account for 88.4 percent of this volume.
Moreover, the IDC outlook for emerging market smartphone volume is 1.4 billion units by 2018, growing to 79.5 percent of worldwide volume.
To date, the support that Google Android platform has received from over 150 handset manufacturers has allowed it to gain the leading share in emerging markets. The lack of proprietary constraints around hardware and software specifications has helped bring to market many low-cost and high-value products.
The other widely discussed trend has been the shift towards large screen smartphones. IDC expects phablets (smartphones with 5.5" - 7" screens) to grow from 14.0 percent of the market in 2014 to 32.2 percent of the market in 2018.
With the expected entry of Apple into this market segment, they have the potential to drive replacement cycles in mature markets -- despite the slower growth and poor performance seen in recent quarters. Clearly, they need to do something decisive to regain some momentum in the global marketplace.