Fortune.com/Aaron Pressman: Why Feature Phone Sales Are Suddenly Growing Faster Than Smartphones

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Why Feature Phone Sales Are Suddenly Growing Faster Than Smartphones
Have a Smartphone Addiction? This Might Help
It’s called the “substitute phone.”
By Aaron Pressman March 12, 2018

After a decade of rapidly growing smartphone sales cooled off last year, a surprisingly low-cost communications device made a big comeback: the humble feature phone.

Typically priced at $100 or less, feature phones can do more than just make phone calls and text—the realm of so-called dumb phones—because they come with a limited array of built in apps to connect to popular services like Facebook (fb, -0.37%) and Google’s (googl, +0.12%) YouTube. But they lack the touch screens, high-end cameras, and vast app ecosystems of smartphones from the likes of Apple (aapl, +0.79%), Samsung, and Xiaomi.

Globally, the smartphone market grew only 2% last year to almost 1.6 billion devices shipped, while feature phone shipments rose 5% to 450 million devices, according to Counterpoint Research. It was the slowest growth on record for smartphones and the first time the feature phone market posted growth in years.

Several key breakthroughs led to the surprise boom, explains Neil Shah, an analyst at Counterpoint. For one, the newest models finally gained the ability to connect to almost ubiquitous 4G networks instead of older 2G connections, which are being rapidly phased out by carriers. Also key was the creation of a cheap but capable feature phone model by Reliance Jio, the super fast growing wireless carrier in India. Other top makers of feature phones included Alcatel, Nokia brand licensor HMD Global, and Chinese manufacturer Transsion Holdings, which sells under brand names iTel, Tecno, and Infinix.

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HMD said recently it sold 70 million Nokia branded phones last year, most of the feature or dumb variety, like the revived Nokia 3310, according to analysts. This year, the company revived the Nokia 8110. Made famous in the 1999 movie The Matrix, the device was dubbed the “banana phone” for its curved shape and bright yellow color option. The revamped 4G capable 8110 goes on sale this month for about $97. It has a 2.4-inch display and comes with apps like Facebook and Google Maps.

“There was huge latent demand for feature phone upgraders waiting for good quality feature phones, which HMD with the Nokia brand expanded on in 2017,” Shah says.

Many of the phones run a version of open source operating system software called KaiOS, which was created from the wreckage of Mozilla’s firefox mobile OS software. Apps on KaiOS are more primitive than smartphone apps and run via the HTML5 coding standards underlying most web sites.

Jio introduced a feature phone running KaiOS in the fourth quarter in India and immediately became the top-selling phone brand in the country, passing Samsung, according to Counterpoint.
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