Will Motorola’s new low pricing strategy worry companies like Samsung?

June 3, 2013
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This means that the Moto X will be a high end phone, but not as high end as the S4 or the HTC One. With lower component costs, lower R&D costs and lower margins the Moto X could have a wholesale price of under $300. And that leads to the second point. The LG Nexus 4. It costs just $299 and is a high end phone with a 4.7 inch 720p display, a Qualcomm Snapdragon S4 Pro processor, 2GB of RAM, GPS, NFC and Corning Gorilla Glass 2.

That means it is very possible to create a high quality, lower cost Android smartphone. But although the Nexus 4 has been very popular it hasn’t really dented Samsung’s dominant position. Winkler is suggesting that Google doesn’t care about its partners because it is going to use Motorola as a direct means to compete with those very same partners. If that were true, the very existence of the Google Nexus range should have sent Google’s partners into a sulk years ago. Although Google has always used its partners as manufacturers for these devices, each phone and tablet has a different manufacturer, so one could always complain or worry about an advantage that a direct competitor is receiving from Google. This simply didn’t happen.

Thirdly, Winkler points out that Chinese companies like¬†Xiaomi are doing well with lower priced high end smartphones. It is thought that Xiaomi probably generated around $2 billion in sales in 2012. He attributes the success of the Chinese maker to its strategy of selling high-end smartphones for less than $300. And he is right, but it also serves as a reminder that the world isn’t just the USA.¬†¬†By the end of 2013, about¬†half a billion Chinese users are expected to own smartphones, ninety percent of which will run Android. For Motorola to make in-roads into Samsung’s market share it needs to think about sales outside of the USA. Samsung is already ahead of the game in China where it¬†¬†posted record high sales with over 12 million units sold in the first quarter of this year.

What does this all mean?

The bottom line is that the Moto X will be a high end phone with a very aggressive price point. It will have betters specs than the current Nexus 4 and will sell at the same or a lower price. If it isn’t better and cheaper than Motorola will go the way of the dinosaur. Traditionally Motorola has been strong in the USA and it has good working relationships with the carriers. That means that US buyers will likely see some good contract related deals for the Moto X. As for the rest of the world, a more aggressive pricing strategy from a big brand could signal a shift in the price/performance ratio of Android smartphones, but that really depends on how aggressive Motorola intends to be.

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