Sales of $100 Smartphones Set to Soar

The number of entry-level smartphones, selling for less than $100, sold this year is forecast to soar to 300 million, more than doubling the total number in use globally to above 500 million. This forecast comes from Deliotte which also said that there were already roughly 200 million such phones in use worldwide, with most of those having been sold just last year. Deliotte also predicts that due to the soaring number of smartphones sold the number of applications available on these devices will also double to more than two million.

New low-cost chip technology is what is bringing about this whole new world of low-cost smartphones, especially in the emerging economies like China and India where smartphones are now becoming affordable to everyone.

In places like India, high prices for phones have been the main barrier to widespread use of mobile devices. In fact, Apple (Nasdaq: AAPL) sells less phones in India – with 602 million active phone subscribers – than it does in Norway! But it is the cheaper smartphones which sell in India, where it is forecast that smartphone shipments will grow 70% annually through 2015.

This shift toward low-cost smartphones is even more evident in China which surpassed the United States in the third quarter of 2011 to become the world's biggest smartphone market. The Asian brokerage firm CLSA says China's smartphone market will more than double to more than 150 million units in 2012.

In western markets high-end smartphones, like the iPhone from Apple, in the $600-$800 range, dominate. In China, however, such phones account for only one-fifth of total phone sales. The remaining four-fifths of sales that sell in the $100-$150 range and, after subsidies from phone operators, cost very little.

This move toward low-cost smartphones in emerging markets may be the last hope for Finnish mobile phone company Nokia ADR (NYSE: NOK) which has lost its once preeminent position in the industry to rivals like Samsung and Apple. Nokia does have an opening here since Apple's iPhone is perceived globally as a premium product and well out of the reach of many consumers in the emerging markets.

Nokia's management is well aware of the opportunity which lies before it. At the Mobile World Congress in Barcelona last week, Nokia management did state that one of the company's strategic goals was “connecting the next billion” of the global population to the internet through smartphones.

Nokia and its new partner Microsoft (Nasdaq: MSFT) are in particular focusing on China. According to IDC, the most popular operating system there is Android. But Microsoft thinks Chinese consumers are just using Android because it happens to be on the cheaper smartphones. If it offers a better experience through Nokia smartphones, Microsoft thinks it will quickly have the most popular phone software in China. The company is also targeting China by opening mobile application stores there.

Microsoft's partner Nokia believes the smartphone which will revive its fortunes is the Nokia Lumia 610. It believes this model will be at the forefront of the new growth engine for the industry, low-cost smartphones. The 610 should sell well in the emerging markets where Nokia is still a leader. But it remains to be seen if the phone can be profitable enough to turn around Nokia's declining fortune.

The article was originally written for the Motley Fool Blog Network. Please be sure to check out my daily articles for the Motkey Fool at http://blogs.fool.com/tdalmoe/