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A $25 smartphone? Phone makers look to emerging markets for growth

By Anick Jesdanun

Associated Press

Published: Tuesday, Feb. 25 2014 12:24 p.m. MST

A man takes a picture with Nokia Lumia 1520 at the Mobile World Congress, the world's largest mobile phone trade show in Barcelona, Spain, Tuesday, Feb. 25, 2014.

Manu Fernandez, Associated Press

Enlarge photo»

BARCELONA, Spain — Here's the rub for companies: A good part of the key markets they serve already own smartphones and use them to connect various Internet services. How do you grow from there?

Companies from Facebook to Firefox are looking to emerging markets for the next few billion people. They are not only targeting the obvious high-population countries such as India and China, but also see potential in Latin America, Africa and just about everywhere beyond the U.S., Canada, western Europe and a few Asian nations.

One message has been clear this week at the Mobile World Congress wireless show in Barcelona, Spain: Even as the affluent crave the latest iPhones or Android phones, most of the world can't afford the hundreds of dollars they cost.

So there's been a push to get mobile devices cheap enough to reach emerging markets without sacrificing so much performance that first-time smartphone owners will give up on the Internet and forgo a second smartphone down the road.

It's a delicate balance.

When Motorola Mobility introduced the low-cost Moto G smartphone last fall, the company emphasized how it was bringing the features of high-end smartphones to a device that starts at just $179. But even then, it had to sacrifice camera resolution and connectivity to the faster 4G LTE cellular networks. And $179 is still expensive for many.

At the Barcelona show this week, Nokia Corp. unveiled the Nokia X series, starting at 89 euros ($122).

"In the growth market . a couple of bucks make a huge difference," said Timo Toikkanen, Nokia's executive vice president for mobile phones.

Still too expensive? Try some of the $50 to $70 smartphones based on Firefox OS, a system adapted from the popular Firefox Web browser. Mozilla, the organization behind Firefox, announced a partnership with Chinese chipmaker Spreadtrum Communications Inc. to create a blueprint for any phone maker to make $25 smartphones.

Microsoft Corp., meanwhile, said it was relaxing hardware requirements to keep phone costs down. For instance, phones no longer need physical camera and control buttons. Those can now be done through software instead.

It is also working with Qualcomm Inc. on blueprints for any phone maker to quickly design a Windows phone. While global brands such as Apple and Samsung reign in industrialized countries, smaller, regional manufacturers thrive in emerging markets because of lower distribution costs and better tailoring to local needs.

Internet services also see opportunities in finding the next few billions in emerging markets.

In fact, getting the smartphone and the connectivity is just the beginning, Facebook CEO Mark Zuckerberg said during Monday's keynote. More important, he said, is giving people a reason to connect: basic financial services, access to health care information and educational materials. He sees Facebook as the "on ramp" to all those services.

In many ways, emerging markets provide unmatched opportunities.

Apple has insisted on making premium smartphones. Even last fall's iPhone 5c was just $100 cheaper, at $549, than the more-advanced iPhone 5s. That's way beyond the reach of many people in poorer countries.

"They are focusing on the premium segment," Lenovo CEO Yang Yuanqing told The Associated Press. "Their market has become mature, saturated. So now, if you want to further grow, you must focus on those emerging markets, particular those poor people."

He said Lenovo releases 40 or 50 smartphones a year to meet the diversity of needs in those markets.

And making cheap phones available will help companies expand in developed countries, too. Even in the U.S., not everyone wants or can afford a high-end smartphone, Sony Mobile President Kunimasa Suzuki said in an interview.

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