Smartphone Price Wars

When two elephants fight, it is the grass that suffers’ – African Proverb

smartphone price warsThe smartphone price wars are linked like Siamese twins to the ongoing specs war that is being waged furiously with a winner takes all mantra.
The rules of engagement are simple enough for anyone to understand: who would produce and sell the cheapest phones with the most awesome specs.
The Android operating system has been a fundamental driver of this war. With the Android operating system (OS), an open source free OS, phone manufacturers were given a great foundation to give consumers modern smartphones at ridiculously cheap prices.
The standard here, at least when comparing two smartphone platforms, is Apple’s iPhone. Using the Android OS, different Android phones makers have been able to give phone users on a tight budget, smartphones that are comparable to the iPhone in terms of performance and basic utility.
And the best part is that they come at a far more cheaper price.
But as usual, with every successful mass product with too many players chasing a customer base beset by the global economic downturn, there must be victims who suffer the most.

Too many brands hounding users

Samsung is by far the biggest manufacturer of Android devices. But it’s market share is constantly been whittled down by small Chinese companies.
This report underlines the scale of the proliferation of smartphones manufacturers competing for user’s attention. Though the report is restricted to China only, it is also a fair representation of the world wide Android landscape since most of these brands aggressively export these handsets.
According to the report, there are about 1,300 different phone brands in China. Samsung still dominates the market with about 35% of smartphones used by the public.
However, the interesting part is this, the figure is actually lower when compared to 3 years ago where Samsung had almost 45% of the market.
It is not as if there is an up and coming player challenging Samsung’s dominance; the simple explanation for that is the sheer number of small companies springing up to make cheaper phones thereby cutting down on Samsung’s and other leading brands’ margins.
The report also highlighted the cutthroat nature of the phone business. Many of these companies barely make it beyond two years. But new ones keep rising up from the dead bones of the buried ones.

Workers as victims

The massive layoffs by companies is a consequence of these cheaper smartphones. The figures are grim. These recent layoffs follow a pattern set several years ago as companies struggle to stay afloat in the face of cheaper phones in the market.
For instance, there are strong rumors that Huawei would soon have to sack some of their workers. The company grew to become the third-largest smartphone maker after Apple and Samsung.
But they recently lost that position to Oppo, another of the new upstarts that is aggressively marketing cheap smartphones to the Chinese and Asian markets.
So for Huawei, one of the best ways to regain that position and increase profitability is to sack workers.
Other companies that have gone the layoffs route in recent times include:

  • HTC recently announced the sack of about 2,300 workers
  • Lenovo sacked 3,200 workers from its mobile division which includes Motorola
  • Microsoft last year announced that it would have to lay off about 1900 workers from its Nokia section in Finland. This brings the total number to have lost their job in the company to about 10,000 workers since Microsoft bought Nokia in 2013.

These are just four major manufacturers that are struggling to compete and survive in the face of cheaper smartphones. The damage to the victims or people who lost their jobs can only be imagined.
Immediately, thousands of people are made jobless; further worsening the economic situation of families and in extension, the communities.
Read: Smartphones Specs War

Consumers are victims too

Here is a typical scenario faced by a consumer intent on getting the best value for his money on purchasing a new phone.
The Xiaomi Redmi Note 2 costs just about $130. The HTC One M9 Plus costs around $700. Depending on the variant, the price of the HTC could be lower or higher than that.
Both phones use similar processors and in addition to that, the Redmi Note 2 has a screen size and resolution similar to the iPhone 6 Plus. Add to that are an IR blaster and phase-detection autofocus, two features found in the best flagship devices like the Samsung Galaxy and iPhone 6. All that for $125.
It is a no-brainer a consumer is far more likely to purchase the far cheaper and apparently better Redmi Note 2 instead of the HTC One M9 plus.
This scenario is played out in many other devices too. One of the best known is the OnePlus smartphones and their so-called ‘flagship killer’ smartphones. These are budget phones that compete with the best flagships at a fraction of the price.
All this seem good for the consumers. But here is the rub: assuming you purchase a cheap smartphone with the best specs from an unknown brand, what happens if the phone develop problems or you want to replace a faulty part later.
We know these manufacturers are not interested in opening outlets around the world or partnering with reputable contractors to provide after-sale services.
You could be using the best smartphone with the latest operating system today, what happens if there is need to update the software to fix security bugs? These manufacturers are notorious for not providing that all important software updates for their Android phones.
The Consumer is now left at the mercy of bugs and hackers.

No respite in sight for victims of the smartphone price wars

With advancement in technology where it is now possible to make gadgets cheaply, consumers are having a ball with so many cheap choices. For this to be sustainable though, the companies have to be able to survive competition from new entrants determined to gain a market share with price cuts.
Invariably, the smartphone price wars leads to cutting corners through employee sacks, poor salaries, and bad working conditions. That can only change if we are willing to pay good money for phones.
One of the benefits to consumers is, more responsible companies would be willing to offer better after sale services to the public.
Sadly though, that day is not in sight. Fly by night smartphones manufacturers will continue to seek for quick bucks with very cheap phones. If older brands have to close shop because of them, so much the better as if means one less competitor to worry about.
That is the basic nature of the smartphone price wars.

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