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June 19, 2013

ABI Research: More Subsidies Seen in Devices Powered by Qualcomm

A recent report conducted by ABI Research, which provides in-depth analysis and quantitative forecasting of trends in global connectivity and other emerging technologies, shows that devices that are powered by Qualcomm are capturing the high end of the device market.

Qualcomm, the American semiconductor company that designs, manufactures and markets digital wireless communications products, is attracting an average implied subsidy of $530. This is in comparison to other integrated circuit (IC) vendor-based products that have a subsidy of $341. The following chart from ABI Research represents the significant difference of $189.

It is no surprise that high-end devices continue to be the most profitable part of the mobile device market. Users want to be able to do more with their mobile devices and that requires that the devices have more features. This fierce competition can lead to what is known as feature creep.

Feature creep, sometimes referred to as “featuritis,” is the ongoing expansion or addition of new features in a product. These tend to be extra features that go beyond the basic function of the product. Sometimes this results in causing the device to be over complicated rather than simple in design.

ABI Research senior practice director for devices, Nick Spencer, said, “Competition is intense and some feature creep is inevitable, but vendors need consider which features create real value for the end user. The question they should ask themselves is, whether they should add in new features, rather than whether can we add in new features? Not focusing on innovation and value creation will result in a price war and margin erosion.”

Stuart Carlaw, chief research officer, stated, “Opportunity remains for device vendors and their IC vendor partners who can profitably optimize their product’s feature sets for low-end device markets and price points.”

We live in a world where so much is available. Unfortunately, this leads to wanting more. In response, manufacturers try to include more and more in each device. The problem with feature creep is that you can have more functions that you really need. If the device becomes too complicated to use there is a good chance that you will step down to a lower end device.

The mobile industry and media have a tendency of focusing on the high end of the market. ABI Research makes note of the fact that this is largely a replacement market. It sees that most of the future growth in the smart mobile device industry will come from lower priced devices.

A lot of companies are designing lower end devices that offer fewer features and functionality for sale in emerging markets. These emerging markets are growing International Data Corporation (IDC) recently reported that emerging markets will surpass one billion unit shipments of smart connected devices by 2014.




Edited by Alisen Downey


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