It’s already been a rough year for BlackBerry, the smartphone maker who forgot the smart bit. 2013 has actually been a great year for Nokia though, who have reemerged as a top manufacturer. For HTC it has been middling, with some successes and some failures. All three share a common worry though, a concern that’s starting to terrify them. The common worry is the wounded smartphone manufacturer of 2013, the company who have been thrashed by Samsung. Rumour has it they are coming for the mid-market…
This year has been notable for one very strong theme in the smartphone space – price erosion. Price erosion has affected everybody, but it has been a painful burden to carry for the likes of BlackBerry, HTC and Nokia, as they operate in the tight margin mid-tier. An Apple competitor in this space would be hugely damaging for them.
To make matters worse, the strong demand for phones in the $400 bracket has bred confidence in this group, and this is reflected in their autumn pricing. All three have been aggressive, aiming at a comparatively high price point. This is leading to increased vulnerability. Such vulnerability doesn’t exist in the basement $200 sector – the companies operating there, such as ZTE and Huawaei are seeing triple digit growth. Demand remains at $600 too, where Samsung and Apple do battle.
The introduction of the budget iPhone 6 this autumn will be a game changer for this sector. Rumored to cost just $350, or free on a two-year deal, the new iPhone is set to cause masses of demand. We’re essentially talking about a re-cut, slightly watered down (think plastic not amainium on the back plate, for example) iPhone 5. To all intents and purposes though, a $600 top-tier giant is coming to play alongside $400 puppies. The result could be carnage.
I wonder how they feel about that ambitious autumn pricing plan now?
After disappointing sales of high-end Z10 and Q10, BlackBerry have decided to price the Q5 value model above $400. After disappointing sales of the high-end HTC One, HTC opted to price the HTC One Mini at around $500. Samsung has a vibrant low-end range, but it also decided to price the Samsung Galaxy S4 Mini at $500.
The great problem with these value offering is that they no longer (if indeed they ever did) offer any value.
And for those who argue that Apple has been selling subsidised old-model iPhone’s in this space for a while, i argue that this is quite different. This is not recycled old-tech – instead it is a brand new release, complete with its own marketing budget. Few company’s market better than Apple, as it would be easy to argue that they’re a company built on just that. From the famous 1984 ad, right the way through to their iconic iPod ad, they are an organisation who are marketers at heart.
So when the world looks to the iPhone 5S this autumn, craning our necks to view the top tier battle, we may miss the carnage in the mid-tier. This could be the real battle ground of the 2013 phone market.
What do you think – could the likes of Nokia be doomed all over again thanks to Apples’ arrival?