Texas Instruments sees $20 mobile phones out this year

Texas Instruments, the world’s largest maker of chips for mobile phones, believes a GSM handset costing as little as $20 could be available by year-end as part of the drive to provide ultra-low-cost phones to people in poor nations.

The company plays a vital role in determining handset costs because it makes the most expensive part of a mobile phone, the chips that run them. To reduce handset costs, TI developed a chip called LoCosto that combines the jobs of four chips onto a single chip, reducing the amount of material needed to make the handset.

A number of major phone makers have already signed up for LoCosto, including Nokia, Motorola, TCL Communication Technology Holdings and other Chinese handset makers, said Desmond Wong, a TI spokesman based in Shanghai.

“We have a roadmap to further reduce overall system costs,” he added.

The drive to create ultra-low-cost mobile phones for poor nations has been championed by the GSM Association (GSMA), an industry group that includes companies from throughout the telecommunications sector. The handsets are aimed at the over 1 billion people in emerging market nations such as Bangladesh, China, India and Russia that lack the money to purchase conventional mobile phones. In fact, while around 80% of the world’s population has wireless coverage, only about 20% subscribe to mobile services, largely because of the cost of mobile phones, according to the GSMA.

The program has already notched a major success.

On Monday, the GSMA said mobile phone service providers in several nations have already bought or ordered more than 12 million mobile phones under the Emerging Market Handset program. The original order was for half that figure.

GSMA launched a competition last year to entice companies to create a sub-$30 handset, a contest Motorola won with two models, the C113 and C113a. A group of 10 operators had agreed to buy 6 million of the winning mobile phones as part of the contest.

The Motorola handsets went on sale at the beginning of this year. TI said its LoCosto chips are not inside the Motorola phone, but the company expects to see other companies such as Nokia announce ultra-low cost mobile phones based on LoCosto later this year.

The first call on a cellular phone equipped with LoCosto was made in August by TI Chairman Tom Engibous at a press event in India. The company expects to see a number of new mobile phones based on LoCosto hitting the market later this year.

“Normally, it takes a year to design a handset, so the phones should be out this year,” said Wong, explaining that LoCosto has been available to phone designers for some time.

The GSMA has set another target, to halve the price of a mobile phone again by 2008, to just $15 per unit, a price TI executives have said is possible, but not necessarily desirable since for just a little bit more money, a user could add such luxuries as a color screen and enough memory to store phone numbers.