Smartphone Growth Continues to Shift to Developing Regions

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    Through its Visual Networking Index, Cisco is usually the company that makes news with studies projecting huge and intimidating growth in data traffic. While the goal implied message of these studies is clear—“You better buy more of our stuff”—it doesn’t detract one bit from the value of the data.

    Ericsson also releases such reports. The latest suggests that the future of smartphones is impressively bright, and in a slightly different way than in the past. The company, which of course also aims to push its products, sees the emphasis shifting to developing economies. That’s in sync with findings from other sources, some of which I posted about previously.

    Ericsson sees a rapid increase, with much of it in places such as Africa. The ramifications of this are laid out in the eWeek article on the study, which was released this week.

    Ericsson isn’t alone in seeing the trend. DailyTech found that Qualcomm’s fiscal fourth quarter (the third quarter of the calendar year) results were “good, but not great.” The story has a lot of the numbers, which featured a 33 percent rise in revenue compared to the year-ago quarter but slowing growth in profits. The key is that the growth is in developing markets, where margins are lower. The story included this commentary:

    Jim Williams Financial analyst Cody Acree, adds in a Reuter’s interview, ‘We know you can’t get the same royalty revenue off of a sub-$200 phone that you get off an iPhone or the Galaxy line.  We’re seeing evidence that the emerging-market impact is having pressure on revenue and earnings trends and it’s forcing the company to react and cut its spending.’

    Three anecdotal news items—two involving Africa and one China—do a good job of pointing out the general direction.

    At the end of the month, IC Insights will publish the 2014 edition of “IC Market Drivers.” The company offered an advanced look. Smartphones, the release said, are a key topic in the report. It notes that Chinese-based smartphone vendors ZTE, Lenovo, Huawei and Yulong/Coolpad “surged.” In 2011, they shipped 29 million smartphones. The total jumped to 98 million in 2012 and are on track to hit 168 million this year. These companies “are primarily serving the China and Asia-Pacific marketplace.”

    The growth theme is much the same in Africa. Frost & Sullivan found that broadband services jumped in Namibia and Mozambique. It’s an indirect measure of smartphone growth, but still a significant indicator. The firm found that last year, Namibia generated broadband revenues of $55.1 million. That number will grow by more than half and reach $78.8 in 2017. Mozambique generated $78.3 million last year and will almost double that to $146.5 million in 2017.

    In the broader African landscape, the explosion of mobile broadband—with quite a chunk clearly due to an increase in smartphones—is just as pronounced., a site in Cape Town, reported on an Informa Telecoms and Media study that sees the mobile data business about tripling during the next half-decade:

    The continent’s mobile data business is currently worth US$8.5 billion a year and will exceed US$23 billion in 2018. ‘It is consumer demand that is driving this growth,’ explains Nick Jotischky, principal analyst at Informa Telecoms & Media. ‘But retail prices are still too high, smartphones are too expensive and there continues to be a lack of investment in connecting parts of rural Africa: These are barriers restraining even greater consumer demand.’

    The studies aren’t apples-to-apples, since they measure somewhat different things over different periods. But the bottom line is clear: The growth in smartphones and other mobile devices—as well as mobile data subscriptions and infrastructure—will be driven by developing regions. This is a lower margin business model filled with regional manufacturers who will enjoy home field advantages. The growth is there, but won’t be difficult to capture.

    Carl Weinschenk
    Carl Weinschenk
    Carl Weinschenk Carl Weinschenk Carl Weinschenk is a long-time IT and telecom journalist. His coverage areas include the IoT, artificial intelligence, artificial intelligence, drones, 3D printing LTE and 5G, SDN, NFV, net neutrality, municipal broadband, unified communications and business continuity/disaster recovery. Weinschenk has written about wireless and phone companies, cable operators and their vendor ecosystems. He also has written about alternative energy and runs a website, The Daily Music Break, as a hobby.

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