Many are still under the impression that whitebox market smartphone are of low quality and are barely usable. The business have started to change their mentality and focus more on quality. During our multiple trips to China in the past 6 months, we’ve witnessed a huge improvement in whitebox smartphone quality. With better economy of scale, prices also have come down very rapidly.
Most consumers are willing to pay a premium for branded products over Chinese brand / whitebox smartphone, especially in the mid to high end segment. However, we believe that in the sub US $200 segment, whitebox makers can offer similar form factor design but much better hardware specifications at lower prices. As such, it’s extremely difficult for branded players to compete with whitebox makers.
The Rule of thumb is the bigger the screen, the better the resolution, processor and camera. Given most branded companies position their smartphone based on screen size (with Apple being an exception), consumers are already used to the idea that the larger the screen size, the higher the price they are willing to pay. The highest models have 5 plus inch screen, high end model with 4.7 inch screen, mid to high end with 4.3 inch screen, mid end of 3.7-4 inch and low end of 3.2-3.5 inch.
Whitebox players are now offering 4.5-5 inch qHD / WVGA display at US$130-200. Normally, branded companies price this kind of product at around US$400-500. It’s impossible for branded companies to launch sub-US$200 model with 5 inch screen because it would disrupt their entire pricing segmentation strategy.
US$150-200 – quad core low cost smartphone
With MTK, QCOM, Spreadtrum and Marvell all launching low cost quad core solution, we expect US$150-200 quad core smartphone to flood the market. Based on the current component price trend, we believe a Cortex A7 1-1.2Ghz quad core processor with 4.7-5.3 inch qHD display and 8MP camera will cost less than US$200 by 1H2013. By then, we believe that the US$200 whitebox smartphone
could start to threaten even US$200-300 mid end smartphone.
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