TI sees under-$20 mobiles by year end

Texas Instruments (TI), is developing a broad range of chips for low-cost handsets aimed at developing countries, and sees prices ranging from under-$20 for basic phones to $35 for GPRS (General Packet Radio Service) mobiles complete with a camera and music player on board by the end of this year.

The company plays a vital role in determining handset costs because it’s the world’s largest maker of the most expensive part of a mobile phone, the chips that run them.

And it’s creating a broader strategy for the developing country market, ultra-low cost chips and higher cost chips that allow a handset to do a bit more.

“When people in developing countries want to upgrade their mobile phones, they’re willing to pay for a more expensive phone with more features. They want more,” said Avner Goren, director of marketing for cellular systems at Texas Instruments, during an interview with IDG News Service at the International Consumer Electronics Show.

A basic GSM (Global System for Mobile communications) handset with a monochrome screen and no frills costs about $25 to build today, Goren said. Such devices are sold to operators in emerging markets, which pay part or all of the cost of the handsets and collect money from users through services.

Adding memory to handsets increases costs by about $10 to $20, but by doing so, a company can offer GPRS (General Packet Radio Service) handsets, which allow users more options, such as basic Internet browsing, sending photos to friends, and more.

Companies are becoming so adept at lowering costs that GPRS handsets with a camera, music player, ringtones, video, and basic Web browsing are possible for around $40 now, and the price is falling, Goren said.

The GSM Association has played a large role in encouraging companies to target the developing world. Two years ago, it organized a contest to build an under-$30 mobile phone for emerging markets. Motorola won with two models, the C113 and C113a, and gained orders for 6 million handsets from a group of 10 operators as part of the contest.

Such handsets are encouraging massive growth in countries such as India and China, which are adding more than 6 million and 5 million new users per month, respectively.

TI serves ultra-low cost handset markets with a line of chips, dubbed Locosto, which combined the functions of four chips into one to lower costs and save on power. The more chips used in a handset, the more power it requires. But brisk handset growth in developing markets prompted the company to develop new lines of chips to target users upgrading to more expensive handsets.

Its Ecosto series of chips will be aimed at low-cost, high function handsets that use EDGE (Enhanced Data GSM Environment), a faster version of GSM service that enables data to run at speedier rates up to 384 kbps. Handsets made using the chips would likely cost between $50-$100, Goren said, and come equipped with a 2 to 3-megapixel camera, high quality digital music player, allow greater Web browsing capabilities and include games.

Third generation, or 3G, mobile phones will likely be more expensive. Goren predicted such handsets will likely remain at $100 to $150 on the low end this year, a far different prediction than Telefonaktiebolaget LM Ericsson.

Ericsson believes that efforts to reduce costs will result in a $70 3G handset this year, due to cheaper components and efforts to reduce the number of parts inside a mobile phone. Goren did not think such a price point could be reached this year.