While strong early sales for the Galaxy S4 and the HTC One have been making news lately, the real story for Android may be how well it does with lower-cost handsets in emerging markets. Barron’s points us to a new note from Nomura Equity Research analyst Stuart Jeffrey, who thinks that many consumers in emerging markets will start upgrading to smartphones primarily because of “the increasing affordability and improved distribution of ‘good enough’ Android phones.” But Jeffrey thinks that what’s good for Android vendors is likely bad for non-Android vendors and notes that Nokia could find the emerging market transition from feature phones to smartphones particularly challenging.
“With a leading 23% feature phone market share and just 2.8% smartphone market share, Nokia is most affected by this shift to smartphones,” Jeffrey writes. “We cut our feature phone revenue forecasts for Nokia by 5% for 2013 and 30% in 2015, yet see no reason to raise our smartphone estimates in compensation.”
Jeffrey also expects Apple and BlackBerry to be hurt by the flood of “good enough” Android handsets in the near term. In Apple’s case, he says that the company seems “flat-footed” at the moment and doesn’t have the experience of competing with ultra-cheap handsets. Even a cheaper version of the iPhone may not be enough to break Android’s rise in emerging markets, Jeffrey argues, because “‘Good enough’ Android phones priced at $100 and below are driving most of the growth; Apple has no exposure to this segment.”
As for BlackBerry, Jeffrey says that much of the company’s market share in emerging markets is based on BlackBerry 7 devices and he says that it’s not clear if BlackBerry’s current subscribers in Latin America, the Middle East and Africa will remain with the platform when they decide to upgrade their devices.