Gray Market for Mobile Cell Phones Drives Low-Cost Flash Memories

The latest study on gray market for cell phones by information and analytics provider IHS iSuppli reveals that there is a massive gray market for cell phones, which in-turn is driving sales of low-cost flash memories. These include embedded multimedia card (eMMC) and serial peripheral interface (SPI) NOR. That is because manufacturers of the unregulated phones are striving to keep production costs low, as per the IHS report. In fact, the IHS study indicates that gray market for cell phones has grown dramatically in last three years. In 2009, shipments amounted to 145 million units.

According to the IHS study, Mobile & Embedded Memory Market Brief, the shipments of gray market cell phones are set to amount to 210 million units in 2012, representing 13 percent of the global mobile handset business. While this is down from the peak year of 2011, when gray market totaled 250 million units, shipments are set to remain high, amounting to 189 million units, or 11 percent of the global cell phone shipments in 2013, reports IHS.

In a statement, Michael Yang, senior principal analyst for memory and storage research at HIS, “Gray-market phones represent a huge segment of the overall mobile handset industry. For manufacturers of these phones, keeping up with consumer trends while maintaining low costs will continue to be a concern as they fight to remain viable in a fiercely competitive market. As a result, the adoption of inexpensive flash memories like eMMC and SPI NOR have been a key trend in the segment for gray-market handsets.”

As per IHS definition, gray-market handsets are cell phones manufactured in China that are not recognized or licensed by government regulators. Makers of these products generally do not pay China’s value-added taxes and, therefore, profit illegally from their participation in the market.

According to IHS, the gray market for mobile handsets thrives primarily in developing countries where a large underground economy exists and where people are keen to obtain phones at low prices bearing desired functionalities.