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Low production costs to make smartphones affordable

By By FRANKLINE SUNDAY | August 20th 2013


Consumers could purchase smart phones for as little as Sh4,000 by next year. The move is expected to deepen Internet penetration as well as  increase digital inclusion.

According to industry projections from technology firm Qualcomm, Kenya’s rapid adoption of smart phones and portable devices is set to increase as the price of mobile technology development reduces.

“The current trends in the mobile data ecosystem indicate that the cost of assembling smart phones has reduced and we are set to see more affordable entry level smart phones make their way into the market,” explained Billy Owino, the director of business development at Qualcomm.

Mr Owino said handset manufactures and operators have reaped the benefits of low production costs, adding that the savings will benefit consumers especially those in developing countries.

“In Kenya, the rate of smart phone adoption in 2009 was at one per cent. Over the years, we have had significant uptake and as at last year 26 per cent of Kenyans possessed smart phones,” explained Owino.

The introduction of the Android powered phone Ideos from Chinese technology firm Huawei was a major turning point for the mobile industry. This saw most users in urban areas move from feature phones to smart phones. The phone, which retailed for a subsidised Sh8,000 from local telecom operator Safaricom, fuelled competition in the sector, leading to an avalanche of smartphone brands into the Kenyan market.

“As new vendors such as Techno, Huwawei and traditional players like Samsung and LG roll out more devices, the competition for consumers is bound to reduce the cost of entry level devices,” stated Owino.

“We could see a Sh4,000 smart phone on offer in Kenya as early as next year.”

Owino said the new smart phones will have more computing capabilities at low cost. The latest data from the Communications Commission of Kenya (CCK) indicates that mobile phone penetration in the country currently stands at 78 per cent.

The adoption of smart phones however remains low with only 15 per cent of mobile devices having 3G capability. There are slightly over 22 million subscribers accessing mobile services through feature phones.

In the National Broadband Strategy released last month, the Government listed the  high cost of ICT devices as inhibitors to ICT expansion and adoption.

Huge benefits

Cutting the costs of smart phones to about Sh4,000 will see more consumers afford the devices. This will up the uptake of data services. Mobile service providers also stand to benefit from increased data revenues.

This is even as the growth of revenue from voice and SMS declined, following stiff price wars. However, phone manufacturers said last week the proposed 16 per cent value added tax on mobile phones threatens to eat into the projected benefits to consumers.

Nokia, Huawei, Microsoft and Intel said in a statement they will be increasing the cost of handsets if the proposed VAT is levied as planned. “The National Assembly’s Committee on Finance, Planning and Trade should reconsider imposing the 16 per cent VAT on mobile phones because it could deal a devastating blow to a nascent digital economy,” read a statement from tech vendors.

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