IDC: Apple must offer low-cost iPhones to keep pace with Android

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Apple (NASDAQ:AAPL) must consider introducing a lower-cost version of its iPhone to maintain the current growth of its iOS smartphone platform and keep pace with Google's (NASDAQ:GOOG) market-leading Android, contends market intelligence firm IDC.

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Click here for a closer look at IDC's forecast.

iOS currently represents 18.8 percent of the worldwide smartphone market and is projected to account for 19.1 percent in 2016, according to a new IDC forecast. While iOS will maintain its position as the number two platform throughout the firm's forecast period, it will remain far behind Android, which is expected to control more than 60 percent of the international market throughout the forecast period.

"The popularity of the iPhone across multiple markets will drive steady replacements and additional carrier partners will help Apple grow iOS volume," IDC said. "However, the high price point of the iPhone relative to other smartphones will make it cost prohibitive for some users within many emerging markets. In order to maintain current growth rates, Apple will need to examine the possibility of offering less expensive models, similar to its iPod line. Until that happens, IDC forecasts iOS to ship lower volumes than Android."

Android presently accounts for 68.3 percent of the smartphone market but will slip to 63.8 percent by 2016, a decline attributed largely to gains by Microsoft's (NASDAQ:MSFT) Windows Phone, which is expected to increase from its current 2.6 percent market share to 11.4 percent. Although Windows Phone is expected to eclipse Research In Motion's (NASDAQ:RIMM) BlackBerry during the forecast period, IDC predicts the RIM platform will grow slowly but maintain market share following the early 2013 introduction of RIM's BlackBerry 10 update. BlackBerry currently makes up 4.7 percent of the worldwide smartphone market and is projected to dip to 4.1 percent by 2016.

"The new operating system and devices will be valued by some longtime BlackBerry fans, particularly those who have waited for the new OS as Research In Motion delayed its release," IDC said. "This will allow the company to maintain pockets of strength in higher-growth emerging markets such as Indonesia and various Latin American countries. But, as with many other new platforms, the success of BB10 will be partly dependent upon channel advocacy, like sales associates who can effectively tell the BlackBerry story."

IDC calls Linux "the dark horse of the forecast," with market share falling from its current 2 percent to 1.5 percent in 2016. "K-Touch has quietly built its Linux volumes this year while Haier recently released its first Linux smartphones," IDC notes. "In addition, multiple platforms are expected to announce and launch their Linux-based smartphones in 2013, including Samsung's Tizen and Jolla's SailFish. Benefiting these platforms are their ties to previous platforms from the LiMo Foundation and Nokia's (NYSE:NOK) MeeGo, which could lead to greater developer interest."

IDC states that vendors will ship more than 1.7 billion mobile phones in 2012, a number expected to increase to 2.2 billion in 2016. Global smartphone volume is expected to reach 717.5 million units this year, up 45.1 percent over 2011; IDC credits the growth to factors including steep operator device subsidies, especially in mature economic markets where carriers resell most smartphones, in addition to a growing selection of smartphones priced below $250 and designed for emerging markets.

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