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The Irreversible Smartphone Price War

The trick ZTE is pulling is utilising the cost savings of its workforce to undercut premium smartphones to such an extent that the benefits they do offer become meaningless. Those with deep enough pockets will always be prepared to pay £400 to £600 for the latest cutting edge handset, but certainly not everyone else.

For manufactures the warning signs came last year. The ZTE Racer married a 2.8in touchscreen with a 600MHz CPU, 3G, WiFi, GPS and Android 2.1. It wasn't going to challenge the flagship smartphones, but at £109 on pre-pay it could make you reconsider buying one. If this concerned rivals, the Blade (aka Orange San Francisco) shortly after gave them nightmares. £20 cheaper than the Racer, it upped the display to 3.5 inches and switched from resistive to capacitive touch sensing technology in order to support multi-touch.
skate
The shockwaves this caused can be seen by the fact that seven months later nothing still comes close to the Blade's value. It has a rooting litany of fan sites dedicated to its customisation and it remains on our list of the 10 Best Mobile Phones on sale. What's more ZTE is about to repeat the trick.

In February it announced the Skate (above), a 4.3in Android smartphone packed full of connectivity yet weighing just 120g. This week ZTE confirmed it will ship with a 1GHz CPU. Pricing has yet to be announced, but it is expected the Skate will be available sim free for between £150 and £250.

The tablet sector is in for a fight too: 7in and 10in ZTE Android tablets will follow in Q4. Meanwhile Nokia, which is readying a Nokia Plans 130M USD Windows Phone Advertising Bonanza/article22152.htm $130m Windows Phone advertising push, will find ZTE wage the same price war on Microsoft powered handsets as the Finnish giant prepares to launch.
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So is ZTE's march to the top inevitable? No. For one ZTE will soon find itself pushed in the West by another emerging Chinese giant: Huawei (watch this space). Meanwhile its rivals know while they may not be able to compete in a straight price war, they can cut margins enough to make their handset's extra features seem more worthwhile. The downside is doing this will shatter the unofficial glass ceiling these companies have so far maintained on smartphone prices and profitability in the sector will tumble.

The upside is consumers will see the greatest benefit. They just won't realise it stems from a little known company based in Shenzen.

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