The Wall Street Journal story about Google's development of an Android game controller and smartwatch are further evidence of this strategy. First, mover Ouya established its Android game controller pricing at $99, and pioneer Pebble set smartwatch pricing at $150. If Google is to match these price points, Android will need to be optimized for lower-powered, less expensive hardware. This will also benefit low-cost smartphone manufacturers.
There are many online examples of low-cost Android 4.1 smartphones, like the ones below. For illustrative purposes, these smartphones are compared to the top-end Samsung Galaxy S4 Android smartphone and the low-end Nokia Asha 311 feature phone. An optimized Android 4.4 that runs fast on low-cost, high-volume systems on a chip (SoC) processors such as the Qualcomm S4 Play will give smartphone manufacturers the ability to produce very inexpensive and competitive smartphones that will make any Microsoft challenge difficult.
The smartphone examples above show how the manufacturers have helped reduce cost:
- Slower processors
- Smaller memory sizes
- Lower-resolution displays
- Limit data speeds to 2G and 3G
Compared to the much more expensive Samsung Galaxy S4, these inexpensive smartphones would be a noticeable downgrade. In contrast, the consumer upgrading from a feature phone will get much improved capabilities, such as web browsing and the availability of more than one million apps for a little more money.
The iPhone is too expensive to compete in this market. Next year, Microsoft and Google will compete with cheap prices to put their brand in as many hands in developing countries as possible. Apple will join BMW in serving the growing middle class in these markets, where it can sustain its margins.
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