THE price of a 2G mobile phone is set to drop to 400 yuan (US$63.50) over the next three months following the development of a cheaper mobile chip, Morgan Stanley said.

Chip makers, like MediaTek, have taken measures to cut the cost of the chip so that it features lower specifications and this is expected to lead to chips costing as little as US$60, Morgan Stanley said in a statement yesterday.

More than 185 million smartphone chips are expected to be sold in China this year, up from 100 million to 120 million units last year, it said.

The US investment bank said that there are 150-200 million units of mobile phones sold in China annually and with chips getting cheaper it sees users moving quickly toward smartphones as well.

"Consequently, we are now forecasting downside to 2G feature phones and upgrading to smartphones," Morgan Stanley said.

Shenzhen-listed ZTE Corp, which has raised its market share through low-end and mid-level models, will "follow the market demand" to launch such models, it told Shanghai Daily yesterday.

Meanwhile the average price of 3G smartphones has also fallen and this attracts many new players in the lower-priced segment, analysts said. For example, HTC Corp, which used to focus on high-end phones, launched the Desire smartphone costing only 1,999 yuan specifically in China.

Source:shanghaidaily