Exploding Demand For Smartphones From Cost-Conscious Customers In China, India Has Cut Prices By 16% In Two Years, More Price Cuts Expected

An explosion in smartphone usage in emerging economies has cut the price of smartphones about 16 percent in the past two years, according to technology market research firm International Data Corp.

Today the average smartphone costs $372, down from roughly $428 two years ago, said IDC. More price declines are expected, with the firm projecting the retail cost of a smartphone could go as low as $307 by 2017.

The price decline is due mainly to high sales volume in emerging markets, where the number of smartphone users has been growing exponentially over the past few years.

In the second quarter of this year, smartphone shipments in China were 88.1 million -- a 50 percent increase from the same time last year. Much of that increase came from urban customers who want mobile access to the Internet. According to a survey from market research firm Kantar, 71 percent of mobile users in Beijing, Shanghai, Guangzhou and Shenzhen used their smartphones to access the Internet at least once a day in 2012, up from just 34 percent in 2008.

Samsung is currently the top provider in China, just above Chinese companies Huawei and Yulong. Apple is lower on the list, with a market share of just 4.6 percent, according to China-based company Analysys International.

Meanwhile, smartphone sales in India have increased by 129 percent to 9 million, and it has replaced the U.S. as the second-largest market after China, according to independent analysis firm Canalys, which compiled data on the shipments for vendors in more than 50 countries.

In India the average price for a smartphone is just $200, and local companies like Micromax closely trail Samsung for a large chunk of market share. According to DNA India, more than half of the smartphones sold there cost less than $200 each.

U.S. companies are doing their best to get in on the action in these growing markets. Samsung has smartphones that cost just over $100, and LG has models in the $200 range. Meanwhile, the price points of the new Apple Inc. (NASDAQ:AAPL) iPhone 5C are less than the current iPhone 5, which can cost up to $800.