Asia drives budget 5G smartphone boom

• Asian phone vendors have been mostly responsible for a 10% surge in ‘budget’ sub-$150 5G device sales in Q2 2024
• Asian markets are also driving demand for such devices
• Now analysts expect service providers to align with device vendors to solidify the trend by capitalising on the budget 5G features and capabilities with their service marketing
• For instance, India’s Reliance Jio has teamed up with Google to develop a 5G entry-level smartphone optimised for Android, an arrangement that works for both parties

There’s a lot of excitement right now about new high-end smartphones from the likes of Apple and Huawei, but what about the other end of the market? There’s growing demand for low-cost devices too, with Asian markets fuelling that growth, according to Counterpoint Research. 

A robust global smartphone sales recovery is underway, with shipments of 5G handsets up by 20% in the first half of 2024, the industry data firm has reported. 

Significantly, the growth has recently skewed towards the sub-$150 budget phone segment where Asian device vendors, such as Xiaomi, Vivo and Samsung (with its already significant 21% of the 5G handset market), are busy accumulating further share. 

And demand for such devices is also strong in the region. According to Counterpoint, 58% of all 5G device shipments were to Asia Pacific markets in the first half of the year, with India, accounting for 13% of all 5G device shipments, just passing the US to become the second-largest market for 5G devices, while China is still out in front with a 32% share of the market.

In the second quarter of this year, budget smartphone shipments (for all mobile technologies, not just 5G) topped 100 million and accounted for 37% of total global smartphone shipments. But there is a growing shift towards 5G devices even in the budget segment, as 5G smartphones accounted for 24% of budget device shipments during the quarter.  

To meet demand, new entrants are developing budget devices for key markets, a prime example being the co-development of an affordable 5G smartphone by giant Indian operator Reliance Jio and Google, first announced in September 2022.  

In fact, the Jio/Google collaboration might be a harbinger of what’s to come in terms of smartphone vendor/service provider lineups. Jio is to shift its core retail businesses to Google Cloud infrastructure where Google will engineer an end-to-end cloud offering for the lifecycle management of Jio’s 5G network and services, then, once it’s nicely tucked up in Google’s infrastructure, Jio says it expects many of its customers will take advantage of Google's AI/ML, ecommerce, and demand-forecasting application offerings.  

This sort of interplay between the smartphone OEMs, cloud providers and mobile operators could extend and solidify budget 5G devices and services in Asia and beyond, and may mark a significant turning point for the global 5G industry.

Previously, big telcos, and the GSMA industry body that represents them, were relying on 5G to enable advanced corporate services, such as network slicing, and thus bring new revenue “streams” to the table (“revenue streams” sounds more voluminous and open-ended than mere “revenues”). But now, slowing demand and the post-pandemic malaise have put paid to that dream – at least for the time being.

One way to compensate for the low uptake of high-value, high-margin business, is to use budget 5G to chase scale – something at which the Indian telcos, in particular, are past masters. The trick is to offer better end-user services for the same money or less, while keeping a tight lid on marketing and cost of sale, and clamping down on per-subscriber costs via increasing automation and more efficient, penny-pinching infrastructure and deployment models.

Essentially, deploying 5G services over a modern infrastructure means coverage can be spread to harvest a multitude of marginally profitable customers as opposed to laboriously chasing down a few high-value corporate accounts.

The ‘budget 5G’ approach is reckoned to be especially attractive for emerging markets, according to mobile market analysts, where huge numbers of potential subscribers are poised to intercept 5G if offered affordable device and service options.

Meanwhile, the ill wind that is the US’s attempt to bury Huawei appears to have blown some good the Chinese vendor’s way. Huawei’s needs-must workaround alternatives to the advanced chips it’s been banned from using may be giving it a workable technical platform to accelerate its 5G positioning, though its new tri-fold phone, at more than $2,800, is anything but budget – see Huawei extends its tri-fold challenge to the iPhone 16.

In terms of market share, Greater China’s smartphone sales (including those of Hong Kong and Taiwan), already appear to be doing well, according to Counterpoint, rising 6% year on year, thanks to overall demand recovery. Meanwhile, Apple’s share of the China market suffered a single-digit decline.

– Ian Scales, Contributing Editor, TelecomTV