Smartphone wars shift from gadgetry to price

Component supplies

However, this growth in demand is pushing up the cost of components, a surprising twist in an industry more familiar with falling material prices as technology evolves.

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China's ZTE Corp, whose mobile business is aiming for 50 percent growth in shipments to 60 million phones this year, has seen the component supply crunch.

"All vendors face the challenge of the cost of key hardware components such as screen displays, memory and keyboards," said Qian Hao Lv, head of ZTE's device strategy. "These are crucial to differentiate one model from the next."

Nonetheless, Kan Yulun, another ZTE executive, said that the company was working on new technologies to drive the cost of smartphones down to $50 or below without compromising on quality.

"We will find tech solutions to reach the $50 price target by the end of this year," Yulun said.

He said he often hears from telecom operators in Africa, who still sell lots of feature phones, that they were now hungry for smartphones but need prices to come down to below $50.

The head of the pack in the sub-$100 race is the Alcatel Onetouch brand owned by TCL. Its brightly-colored Idol family of phones have already proven a hit in Latin America and Europe and the firm launched two new phones for under $100 at the Mobile World Congress this week that can run on 4G mobile networks being rolled out in China, Brazil, and elsewhere.

But while many players are now chasing the lower end of the market not all are, fearing that stripped-down hardware features can only lead to a commoditized market where no one can differentiate and maintain a worthwhile profit margin.

Huawei, the world's third-biggest phone maker, prefers to aim higher by increasing the proportion of its phones that sell for 300 euros ($400) or more as opposed to the low-end it defines as under 150 euros.

"We are not interested in the sale volume of those low-end, low-priced phones," said Chief Executive Eric Xu.

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