Chipmaker Qualcomm (QCOM) made tech headlines on Monday with the announcement that the company would be rolling out a new line of chips to work in lower-end mobile devices, even flip phones.
At first glance, this seems absurd. After all, flip phones have gone the way of the dinosaur here in the U.S. Although a new attention-grabbing launch from BlackBerry (BBRY) indicates there is already such a thing as "cellphone nostalgia," how could working on products for cheap, relatively outdated models make good business sense for Qualcomm?
In reality, though, there's still a huge and booming market for cellphones that we in the West might consider outdated. In India and countries in Southeast Asia, as the middle class grows (and as the infrastructure improves) lower-end phones are wildly sought after.
JPMorgan Chase (JPM) analysts expect smartphone sales in India to experience 15% growth this year alone. The country boasts a low-cost yet aggressive wireless carrier, Jio, that currently has more than 100 users in 2016. The company's goal is to reach 400 million customers in the near future.
That means there are 300 million new cellphone users with comparatively little disposable income who need cheap phones, which in turn need chips. And that's how Qualcomm and its investors are going to profit.
The India and Southeast Asia cellphone markets are hotly desired by mobile phone and technology companies, especially because cellphone growth has flat-lined here in the U.S. and in other developed countries. Worldwide smartphone sales saw growth of only 2% in 2016, but compare that to the 15% expected for India this year.