"The ultra low cost market will likely be the main driver of global handset growth in 2007; we forecast new subscriber additions in India and China to grow 50 per cent and 15 per cent year-on-year in 2007 respectively," Citigroup's latest report on Asia Handset Beat said.
The mobile subscription base for India till September 2006 was over 9.10 crore (91 million) as per information available on the website of cellular operators Association of India.
With a view to penetrate the emerging markets and compete with rivals like Nokia for market share, Motorola had launched its ULC handset Motofone last month. While, Nokia has also disclosed production roadmap for an ULC phone called Barracuda for 2007, the report said.
The GSM version, Motofone F3, will start shipments in India and Motorola plans the CDMA version launch by end of 2006. The GSM unit in India will be priced at around Rs 1500 ($33) and the CDMA would be priced at about Rs 1800 ($38-40), says Citigroup.
The debut of the Motorola's much awaited ultra low cost handset along with its existing models is likely to boost the regional component suppliers.
"We think the product launch is positive to related component and assembly suppliers in Asia, which should outperform peers in the next 1-2 quarters amid seasonal weakness in handsets," Citigroup analysts said in the report.
As per the regional supply chain checks, Motofone is expected to have component shipments units of 4-5 million in the fourth quarter of 2006. Flextronics would be the main electronic manufacturing services supplier in China and India and Foxconn is likely to be added as the second source.
The other key component vendors for this region are Compeq in PCB, AAC Acoustic in 2-in-1 speaker module and E ink in the EPD (Electrophoretic Display) segment.
However, Citigroup maintains its cautious view on the global handset sector for the next three to six months, as it believes that the ULC handset demand most likely would not be able to offset industry growth deceleration for this period.
Meanwhile, ULC models such as Motofone is reported to have low yield rate problems ranging from e-paper display to mechanical component integration like keypad, lens across the supply chain.
The simplified design creates more manufacturing difficulties, in which component supply constraints could hurt Motofone's market share, Citigroup added.