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BLOG: A good, cheap smartphone: Mobile's final frontier

Galen Gruman | Nov. 21, 2013
The Moto G and Galaxy S III Mini set out to prove you don't have to be rich to have a modern smartphone

The Moto G and Galaxy S III Mini are trying to to find a middle ground, reducing costs and profits to bring the price down to $200 for the basic model, which gets in range of what the emerging middle class in developing countries can contemplate. Apple could do so too if it wanted -- I've run the numbers to show how Apple could build a truy cheap iPhone that costs between $200 and $300, which would put it in range of the upper middle class of those developing countries. (Poor people in those countries can't even dream about $200 smartphones, which leaves them with bottom-scraping devices like the ZTE Open, bargain Android devices, and Nokia's Asha line.)

What have Motorola and Samsung done to get their Moto G and Galaxy S III Mini more affordable? They've used small screens, which are much cheaper than the large-screen trend so popular in rich countries. They've used cheaper, often older components, so reliability, responsiveness, and build quality are middle of the road, not superior -- think Target, not Macy's. They're skipping LTE support, using just 3G frequencies -- which is fine, since LTE coverage is still rare outside the United States and, recently, Europe. As a result, the companies are making smaller profits, hoping that large volumes of sales will add up to big numbers in the end.

In other words, they're taking the same approach as appliance makers, car makers, TV makers, and pretty much every other finished goods manufacturer uses to lower prices for poorer customers. It's not magic, but it wasn't so possible to carry out until much of the technology in smartphones became commonplace, allowing for economies of scale to kick in. The smartphone revolution really began taking off in 2010; now at the end of 2013, the components are no longer exotic.

The 3G-only Moto G isn't available for the United States, but should hit the market in winter 2014. The Galaxy S III Mini is sold in the United States, although in a $300 version (free with a two-year contract) that has LTE and other beefed-up capabilities to better compete with iPhone- and Galaxy S-class expectations.

Motorola has been struggling to get buyers, and the Moto G is a sensible step to capture the growing middle-class market in developing countries, where the iPhone's and Galaxy S series' price provide an opening. Samsung wants to serve all markets, so it makes a smartphone for almost every stratum, and the Galaxy S III Mini fits one of those strata. Apple has decided it wants only the high-profit part of the world, similar to its Mac strategy, favoring income over sale volume, so it's not a factor in the development of cheap but capable mobile devices.

 

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