Home » Future Tech: Cheap Smartphones Set to Rattle Tech Market

Future Tech: Cheap Smartphones Set to Rattle Tech Market

by Chris Poindexter

For some time the technology market has been in a transitional state between the days of the old tech dinosaurs, like desktop PCs, and newer, lighter, and smaller connected devices. The need for powerful computing devices has not gone away, but has been confined to a smaller segment of the market. Today you need a reason to have a big tower or powerful laptop; reasons like CAD, video editing, 3D modeling, gaming, and other processor-intensive tasks that are simply not needed by the average user — and remain a pipe dream for the larger population of the planet, many of whom don’t have electricity they can count on. For an increasing fraction of the global population, their ticket to the online world is going to be through a smartphone.

As devices on the lower end of the connected device market become more powerful and less expensive, it puts pressure all the way up the technology ladder. That pressure is being felt by yesterday’s tech giants as Microsoft, Apple, and HP struggle to carve out a niche in a technology world driven, in many ways, by a combination of Google and falling hardware prices.

New lower-cost smartphones like the Moto E, which can be had for $129 unlocked, no contract, are going to dramatically expand the mobile smartphone market. Even that thrifty out-of-pocket price point will be challenged by capable smartphones that will be closer to $50. The continued downward pressure on smartphone prices will lead to an expansion of the mobile data market that Ericsson Mobile estimates will balloon to 9.3 billion new subscribers between now and 2019. (Disclosure: Ericsson is one of my former customers.)

Losers in the Mobile Device Transition

The new technology paradigm has been particularly brutal on HP, which recently announced another 11,000 to 16,000 in layoffs as it struggles to find a toehold in a declining market. If you’ll remember, HP bought up Compaq and other PC manufacturers to become the largest player in a technology space that’s quickly becoming less relevant. In order to stem the slide HP is offering a $99 seven-inch Slate Plus tablet through vendors like Walmart.

Apple is going to be another loser in the commodity smartphone game, as a fully functional $129 smartphone is going to make justifying spending $500 or $600 on a iPhone a tough sell going forward. Recent problems with some iMessage users having problems migrating to Android phones cast Apple in an anti-competitive light, and the company sheepishly announced a forthcoming fix. Despite the rise of commodity hardware, Apple insists it’s not going cheap on phones. Time will tell if that’s a brilliant marketing strategy or epic denial, but what’s for sure is $500 iPhones are not going to be leading the explosion of the global mobile market.

Microsoft has managed to keep posting solid earnings numbers despite the declining market for their most profitable products,operating systems and productivity software. Redmond’s mobile operating system was so unnecessary they had to buy Nokia to finally get traction in that space. Even though Windows Mobile is growing quickly, one wonders how the tech giant will remain competitive and be able to attract developers with a 3.9% share of the mobile market in 2014. It’s a surreal moment in the tech industry when a company the size of Microsoft gives themselves a high five for overtaking Blackberry, a company that’s been circling the drain for years.

Another Tech Bubble?

The continued migration to smaller connected devices, and the transition to service model development, have left many in the tech world feeling like we’re in another technology bubble. Recent price moves in the tech-heavy NASDAQ certainly lend to the general atmosphere of uncertainty, which definitely feels bubble-like, but may just be a symptom of the broader discomfort inherent in the realignment of the technology sector. The general sense of malaise lead Best Buy’s CFO to recently grump about a lack of innovation in the technology market, after a less than sterling quarter for the electronics retailer.

I’m not sure it’s in a bubble, but the tech world is waiting for something to collapse — and perhaps that thing is nothing more than the old ways of doing business.

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