NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, February 10, 2017

Last week, an Indian government official announced that iPhones will start rolling off an assembly line in Bangalore by the end of April, targeted at local customers. It’s a big moment for Apple Inc., which is counting on India’s emerging middle class to make up for slowing sales in other markets. But don’t bet on the iPhone conquering India, or any other emerging market, just yet.

That’s because smartphones of all kinds are facing stiff competition from an unlikely new challenger: feature phones. With simple handsets and small screens intended mostly for calls and text messages — similar to the Nokia or Motorola you probably owned years ago — a new generation of feature phones is suddenly looking like a threat to Apple and its rivals.

For a technology long ago left for dead, feature phones have lately made some impressive gains. After years of almost continuous decline, global shipments have grown for two consecutive quarters. Growth in emerging markets has been especially impressive: In Africa, feature-phone shipments surged 32 percent year-over-year in the second quarter of 2016, compared to a decline of 5.2 percent for smartphones. Expect that trend to continue, for a few reasons.