ARM: $20 Smartphone Will Be Here Soon

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Chipmaker ARM (NASDAQ:ARMH) has predicted that within the next few months, a smartphone will be created that retails for just $20 as device makers seek out the last area of major growth left for the smartphone industry: emerging markets. During a presentation at the company’s second annual Tech Day, according to a report from AnandTech, ARM forecast that a smartphone running on Google’s (NASDAQ:GOOG)(NASDAQ:GOOGL) open-source Android operating system with one of ARM’s Cortex A5 processors would become available in the next few months retailing for $20.

These $20 devices obviously won’t have nearly as much power as high-end smartphones from Apple (NASDAQ:AAPL) and Samsung (SSNLF.PK), but they could give people who have never been able to afford a smartphone access to mobile computing for the first time.

It has been well documented that the smartphone market is steadily reaching its saturation point, especially in developed nations, where almost everyone who wants a smartphone now has one. The last major frontier of growth for the industry is in emerging markets, where consumers typically can’t afford a device costing hundreds of dollars and carriers don’t offer the heavy device subsidies seen in the U.S. A $20 smartphone would give consumers in those markets their first opportunity to perform computing tasks via mobile and use apps, which will open up a whole new group of users for companies like Google and Facebook (NASDAQ:FB), which rely on ad dollars made from mobile.

ARM said that it not only expects $20 smartphones to hit the market soon, but that devices in that price range will soon compose the most growth in the smartphone industry. The company’s presentation predicted that by 2018, more than 1 billion entry-level smartphones will be shipped per year, doubling the amount seen in 2013; the company said entry-level phones will account for around half of the market, while premium phones will see their numbers remain steady.

There are already some pretty cheap smartphones hitting the market now. Mozilla has released a $25 phone running on the open-source Firefox OS, which the company debuted at the Mobile World Conference in February. The Firefox OS smartphone is not meant to compete with other smartphones, but rather replace feature phones for those who haven’t yet been able to afford a smartphone. “For the price of a bottle of wine, it’s an impressive achievement,” said CNET reporter Stephen Shankland, who got to try out the phone at the conference.

Mozilla has continued developing its open-source Firefox OS, an operating system that adheres more closely to open-source principles than Android. The smartphone manufacturer ZTE began selling its own device running on Firefox OS for just $99 only on eBay on Friday, TechCrunch reports. The publication noted that a cheap device using Firefox OS is almost perfect to sell in a location like China, where many consumers can’t afford expensive phones and many Google services that would be found with Android are locked.

As it gets cheaper and cheaper to make a fairly well-functioning smartphone, companies like Apple that focus on high-end devices will face increasing questions about how to achieve growth in a market where the only people buying new high-end smartphones will be those who need to replace their current devices. Meanwhile, more people around the world will soon be able to afford access to mobile computing.

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