Tier2 Marketplace

Tier 2-3 OEMs are primed to dominate tomorrow’s smartphone marketplace

Date: 02/07/2017   By: Jacob Katsof

Share

The future is calling

Tier 2-3 OEMs are primed to dominate tomorrow’s smartphone marketplace

The ever-expanding global smartphone ecosystem is currently undergoing a massive tectonic shift. Currently, the top 10 Tier 1 Original Equipment Manufacturers (OEMs) dominate the smartphone world with a 70.5% market share. Yet as the marketplace expands to a projected 1.7 billion smartphones sold worldwide by 2020 (which will account for greater than 99% of all handset sales as “dumbphones” are phased out completely), much of that expansion will be populated by Tier 2 and Tier 3 OEMs. The roughly 100 Tier 2 OEMs are categorized as currently accounting for about 25-29% of the market, while hundreds of Tier 3 “white-label” OEMs make up less than 5% of the market.

Even as the global marketplace expands creating room for growth among all OEMs, the premium (Tier 1) smartphone growth is actually projected to slow, while mid-range (Tier 2) smartphone growth continues to show upsurges largely driven by new smartphone consumers in developing markets. In fact, such markets will account for 75% of all smartphones sales by 2018 and will be the engine for overall market segment growth.

A strong OEM base across the mid-range smartphone market is needed to serve this growing population.

The ways in which consumers buy mobile devices are also undergoing dramatic changes across the ecosystem. Previously, developed market consumers would visit their local carrier store (say, Verizon or AT&T), where they would have the option to purchase one of a select handful of carrier-subsidized smartphones. The subsidies reduced end-users’ upfront costs to a range of free to about $200, and created a fundamentally symbiotic relationship between consumer and manufacturer. Consumers were able to acquire the latest tech for hundreds of dollars below market value, while manufacturers were able to ascertain valuable consumer demographic and purchasing habit data through the carriers, who acted as sales channels.

In 2014 when Congress passed the Unlocking Consumer Choice And Wireless Competition Act, this opened the door for consumers to get any phone they want unlocked and choose their own carrier, and established a manufacturer-to-consumer relationship in the U.S. that now mimics that of the longstanding model in the rest of the world, where most consumers would spend a nominal amount of money on a cheap dumbphone, then purchase prepaid SIM cards from local mom-and-pop stores. In China, for example, more than 60% of sales are now expected to come through open channels that do not require consumers to be tied to a carrier contract.

This shifting of the consumer sales model, along with a push to consolidate SKUs to reduce total cost of ownership and drive market upside, as well as developing features and functions that most closely meet carrier and customer preferences, is the key to overtaking a larger share of the growing global smartphone marketplace.

UpChannel’s platform enables these Tier 2 and Tier 3 OEMs to aggregate, analyze and assimilate consumer data into their business models to assist them in distribution decisions, customer engagement, cost-saving measures and post-sale revenue.

Leave a Reply

Your email address will not be published. Required fields are marked *