Newley Purnell reports in the Wall Street Journal:
Millions of first-time internet consumers are connecting to the web on a new breed of device that only costs about $25. The gadgets look like the inexpensive Nokia Corp. phones that were big two decades ago. But these hybrid phones, fueled by inexpensive mobile data, provide basic apps and internet access in addition to calling and texting. Smart feature phones are the mobile-phone industry’s fastest-growing segment, providing the world’s poorest to enter the internet economy. While global smartphone sales began sliding as markets became saturated, smart feature phone shipments tripled to 75 million. 84 million are to be shipped this year.
The hottest phones for the world’s next billion users aren’t made by smartphone leaders Samsung Electronics Co. or Apple Inc. In fact, they aren’t even smartphones.
Millions of first-time internet consumers from the Ivory Coast to India and Indonesia are connecting to the web on a new breed of device that only costs about $25. The gadgets look like the inexpensive Nokia Corp. phones that were big about two decades ago. But these hybrid phones, fueled by inexpensive mobile data, provide some basic apps and internet access in addition to calling and texting.
Smart feature phones, as they are known, are one of the mobile-phone industry’s fastest-growing and least-known segments, providing a simple way for some of the world’s poorest people to enter the internet economy.
While global smartphone sales began sliding last year as markets became saturated, smart feature phone shipments tripled to around 75 million from 2017, according to research firm Counterpoint. Some 84 million are likely to be shipped this year.
Even as rich nations start to roll out 5G technologies, some 3.4 billion people around the world remain cut off from the internet, according to We Are Social, another research firm. Most of them already use traditional, unconnected mobile phones, meaning they can easily make the transition to similarly shaped devices capable of high-speed web connections.
Take the case of Kamlesh Kumar, who makes about $80 a month selling mangoes, avocados and lychees off the sidewalk in New Delhi.
Two years ago the 35-year-old decided to replace his inexpensive mobile phone that lacked web access. He couldn't afford even the cheapest, bare-bones smartphones that cost around $100. So he paid about $20 for a smart feature phone, called the JioPhone, from Indian mobile operator Reliance Jio Infocomm Ltd.
Now he listens to Bollywood music on the job, using Google’s built in voice assistant to search for Hindi-language tunes on YouTube. At night his family crowds around the device to watch movies.
“I couldn’t do anything on my old phone,” he said. Mr. Kumar pays less than $2.50 a month for all the mobile data he needs.
Smart feature phones aren’t only inexpensive, but they also have physical keypads that are less intimidating than touch screens for those new to the technology. Meanwhile, their batteries last for days, a bonus in places where electricity is unreliable.
There is a trade-off for the low price. The devices typically have slower and less powerful components, only basic cameras and their screens are usually just a few inches in size, factors that contribute to their longer battery life. There also are fewer apps available for smart feature phones.
“The demand for reliable and affordable technology continues to rise” around the world, said Caesar Sengupta, vice president of Google’s Next Billion Users initiative. “Smart feature phones provide a gateway for the next billion users to more advanced, affordable technology.”
The category was popularized by Reliance Jio, the telecom company backed by India’s richest man, Mukesh Ambani. When its service started in 2016, executives realized millions of people who could afford its dirt-cheap data weren’t signing up because they couldn’t afford a smartphone.
So the company developed the JioPhone, teaming up with Hong Kong-based KaiOS Technologies Inc., which makes the most widely used operating system powering smart feature phones globally. The software is designed for devices with limited memory and physical keypads.
Reliance Jio has sold more than 60 million of its devices so far in India, the only market where they are available.
Recognizing smart feature phones’ potential to connect the next billion users, global tech companies including Facebook Inc. and its WhatsApp service, Alphabet Inc. ’s Google and Twitter Inc. have tweaked their apps so they can be used on the devices. Last year Google invested $22 million in KaiOS.
Roughly 370 million smart feature phones will be sold in the next three years, a $28 billion opportunity for hardware, software and services companies, Counterpoint says.
That is dwarfed by the market for smartphones, of which 1.5 billion units were sold last year alone. But average smartphone prices continue to hover at over $300 globally, so they remain out of reach for many.
French mobile operator Orange SA in recent months has launched an inexpensive smart feature phone bundled with inexpensive mobile data plans in the Ivory Coast, Mali, Burkina Faso and Cameroon and has plans to bring it to other markets in Africa and the Middle East.
A limited number of smart feature phones are available in Indonesia and Indonesian manufacturer WizPhone will in a few weeks begin offering a smart feature phone that can be purchased for around $7. KaiOS is also working with Brazilian smartphone manufacturers to roll out models there.
While populous developing markets offer the most potential for the devices’ growth since that is where most of the world’s next billion users are located, some companies are pitching similar gadgets to niche audiences in richer countries.
Finland’s HMD Global Oy, which sells Nokia phones, is offering revamped versions of its popular candy bar-shaped phones, but with added web access. With price tags nearing $100, their target audience is enthusiasts of the original devices.
Swedish firm Doro AB launched two KaiOS-powered mobile phones designed for older people in the U.S. and Europe last year. The flip phones with large buttons cost between $50 and $150.
“A smartphone can be complex and some people get scared,” said Sebastien Codeville, KaiOS’s chief executive.
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