The smartphone market is changing at an incredibly rapid pace. In fact, I’m in Hong Kong this week at Qualcomm’s 3G/LTE event and have met with many Chinese-based handset makers and they have expressed the very same things. For many years, it looked as if there were nothing that could slow it down, but now we’re seeing exactly that. Aside from Apple, the smartphone market is no longer looking as unbalanced in terms of market share than it has in the past. This is creating a market where fewer bigger players are fighting for roughly the same amount of users, and the devices they are making are becoming more and more affordable to consumers. This dynamic is putting downward pressure on smartphone ASPs (average selling prices) and is pushing many once high-end features towards the mid-range and low-end in low-cost smartphones. As a result, many OEMs who never thought they could compete on the global market are now directly competing with Samsung Electronics and Apple for market share and consumers’ mind share. To compete with Samsung Electronics and Apple, many upcoming OEMs are wasting millions of dollars creating too many SKUs that they may eventually never sell. We created an economic model that shows that through SKU consolidation, one could see an 8% gross margin improvement through aggressive SKU management. This column is a flyover, but you can find more information here.
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