Bridging the Digital Divide with Ultra Low-cost Smartphones

According to the Alliance for Affordable Internet, 2.5 billion people in emerging economies now have access to mobile broadband coverage, but many still cannot afford the typical smartphone. They need a device that hits the right price point, and also provides the right capabilities to support and enhance them in their daily lives. Despite greater connectivity, hitting this ‘smartphone sweet spot’ remains a challenge. Fortunately, ultra low-cost (ULC) smartphones built on Arm technology can provide the path to improved accessibility in emerging economies and help bridge the digital divide.

Low-cost phones

Firstly, what do we mean by a smartphone in this context? By definition, a smartphone includes a large touch screen and the ability to connect to the internet via a web browser, download and run a variety of applications and take good photos.

Under this definition, the cheapest feature phones – that retail for $10 and mainly offer voice and text services – are ruled out, as they do not offer these capabilities. Smart feature phones – the next step up – are also ruled out. Retailing at $20 to $40, they do connect to the internet, have web browsing capabilities, and offer some useful, but cut down, applications, including WhatsApp, Facebook and Google Maps. However, smart feature phones don’t support a touch screen.

This brings us to ULC smartphones, which fit the definition criteria and have the right capabilities. ULC smartphones have the touch screen lacking in smart feature phones. They also run various versions of Android, including a simplified version called Android Go, which allows people to access popular applications that have been optimized for low power, low memory devices.

The affordability challenge

ULC smartphones sound perfect for people in emerging economies and the experiences they’re demanding; however, sticking with the price point at $50 remains a challenge, at least in the short-term. This is because the best way to make these devices more appealing to potential customers – and therefore get better volumes – is enabling better experiences and services, which means better hardware and improved capabilities, but also additional costs.

Under previous circumstances Moore’s Law would lower component costs, but the rate is slowing and having less impact on the tech industry. Alongside this, just about every cent has already been squeezed out of smartphone manufacturing with huge innovation already happening throughout the supply chain, leading to little or no room for further price decreases. In fact, the progress of the industry in making the manufacturing process as smooth and efficient as possible has been phenomenal.

So where does this leave Arm and the wider industry in helping to bridge the digital divide in emerging economies? Based on the current landscape, a combination of advanced capabilities and experiences on ULC smartphones and new financing models is the best way forward.

Enhanced experiences and capabilities

If manufacturers can improve the capabilities of ULC smartphones and experiences they provide – and by default the mass-market consumer appeal of the devices – there is a market there. Arm’s own estimates indicates that around 900 million ULC smartphones could be shipped between now and 2027 in emerging economies. There is also the possibility of adding another 290 million more shipments from upgrading people who traditionally use a smart feature phone to a ULC smartphone.

When thinking about the experiences and capabilities that people in emerging economies need from their smartphones, it is best to focus on the most critical application areas – education, healthcare, and financial services.

For education, users need to be able to participate in classes and complete and upload their assignments and homework on their devices. These classes can be delivered in real-time via messaging applications or as downloadable videos.

For healthcare, the goal is to allow local health providers to deliver healthcare to the widest community of people in towns, villages, and the countryside. The ULC smartphone can help in the delivery of health information and storage of medical records. It can also provide the ‘digital identity’ for access to sensitive data for health services, which would ideally be supported by fingerprint recognition as a minimum.

In the area of financial services, ULC smartphone users should be able to have access to personal banking accounts and the ability to make payments to third parties and transfer money to family and friends. Here again, security is vital.

Technical capabilities and upgrades

So, how do these vital experiences translate in terms of technical capabilities and upgrades on ULC smartphones? At Arm, we believe there are five key areas.

Firstly, good multi-touch screens with visibility in bright sunlight. This is most important for education where students are participating in classes, watching videos, and doing assignments directly on their devices. It is likely that a full HD 5.8’’ will be the ‘sweet spot’ for the ULC smartphone screen size.

Beyond size, however, pixel density, screen brightness, contrast and color accuracy, will contribute to the overall viewing experience. For resolution, for example, a target of about 300 ppi seems sensible, as this will provide an appropriate trade-off between the capability of the device, the cost of this feature and the power that it would consume.

Secondly, RAM will also need to increase from 1GB RAM to a minimum of 2GB RAM, coupled with a minimum of 32GB ROM for local storage of education materials, like documents and videos.

The battery is the next critical technical component, particularly because power supply is not always readily accessible. A move to increase the battery capacity from 3000mAh to 4000mAh would again be a potential sweet spot for people in terms of cost and a full day’s untethered experience with no need to charge.

Next, ULC smartphones need a good baseline security to enable and provide the trust for healthcare and financial services. Already the industry has adopted Trusted Execution Environments (TEEs) for biometric payments, Point of Sales (PoS) and digital identity use cases worldwide using Arm TrustZone technology that is inherent to every Arm CPU. In the future, these use cases may also be supported by software vulnerability reduction and security countermeasures, such as branch predictors and pointer authentication.

Finally, to deliver the performance needed for faster app launch speeds and UI fluidity, the processors that ULC smartphones adopt will need to be upgraded. This means moving away from the quad Arm “LITTLE” CPU configuration of low power Arm Cortex-A processors to an Arm “big.LITTLE” CPU configuration that combines lower power, more energy efficient processor cores (LITTLE) with more powerful and performant (big) processor cores. This helps support tasks and workloads with high-processing intensity, such as web browsing or video streaming.

These five technical upgrades all sound great, but as described at the start there is a cost attached to them. Approximately $30 will be added to the already stressed price point of $50. All of these are necessary to make ULC smartphones more appealing to consumers, but will they be able to afford them as an up-front cost? Therefore, new ways of payment in emerging economies, such as device financing, will need to be considered.

New financing models

Credit is new to many emerging economies, but different device financing models have already been successfully introduced by operators and their partners. They work by allowing the end customer to pay a smaller up-front fee and then a subsequent monthly charge over the period of the contract.

Finance companies are more willing to take a risk on new financing approaches  because there are solid technical mechanisms to control the device. For example, if a person stops their monthly payments they can be warned and if they continue to not pay the phone can be locked.

A major benefit of these new finance models is they can allow other stakeholders in the ecosystem to contribute, with everyone in the value chain benefiting from more people having access to smartphone technology. For example, the big app companies will benefit from more customers and more accounts, so it could be in their best interests to help subsidize the device costs.

Another method could be more circular business models where ULC smartphones have a second and even a third life of putting services into customers hands. This involves the same device being passed between customers, with both the hardware and software having a residual value. If this can also be coupled to a device finance model – which is more likely given the upfront design focus on both the customer and security – then that too could increase the number of people who can afford a device finance plan.

For example, the first user of a ULC smartphone may pay $7 per month, then as the residual value of the device goes down so does the payment plan, with the next customer paying back $3 per month. This represents a completely different and more affordable proposition that both helps bridge the digital divide and is also more sustainable, with less mobile devices going to landfill.

Connecting 2.5 billion people

ULC smartphones that provide the user experiences people in emerging economies need at $50 or less are unlikely in the short term. However, improving the capabilities to increase customer pull and experimenting with new financing models to improve access can help to improve smartphone access and connectivity. Through collaborating with the wider industry and encouraging the adoption of ULC smartphones that are built on Arm technology, we can bridge the digital divide in emerging economies and connect the next 2.5 billion customers to the digital world.