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Moto Now Owns the Budget Phone Market — And That's a Problem

Cheap smartphones are a dime a dozen these days, but you wouldn’t want to use most of them.

That’s not to say they must be avoided entirely — you just have to do your research first. Which is why Tom’s Guide spends so much time separating the best from the rest. And for the last few years, the best has often come from one company — Motorola.

Moto E5 Plus

Moto E5 Plus

Rather than chasing gimmicks and ratcheting up costs, Motorola has settled upon a winning formula: give users exactly what they need for a price they can afford. The low-end Moto E and mid-tier Moto G devices proved to the world that inexpensive phones could be fast and efficient, with a delightful software experience on par with their flagship contemporaries and genuinely novel features that existed to serve the user, not the brand. I’m talking about value adds like Active Display, and intuitive gestures that let you to chop to activate the flashlight and twist to launch the camera.

Even after about five or six product cycles and multiple corporate shake-ups and identity crises, Motorola is still at it. The Moto E5 and G6, revealed this week, come in a variety of flavors. Some have 18:9 screens and small bezels, while others pack massive batteries and dual cameras. Each one can be had for less than $300, and they’re all the phone you really need.

MORE: 15 Cheap Android Smartphones (Under $200) Ranked Best to Worst

The strategy hasn’t necessarily worked well for Motorola from a profitability standpoint, but has produced a succession of critically lauded and accessible products. It’s an ironic shift for a company that entered the smartphone space with a reputation for power, always committed to winning the never-ending race for specs supremacy with devices like the original Droid and Atrix 4G. Motorola’s current range-topping handset, the Moto Z2 Force, almost feels like an afterthought in light of the progress the brand has made on the other end of the market.

But Motorola still has to contend with rivals competing for the same demographic. There’s ZTE, which has put together a string of respectable cheap phones, including the new $79 Tempo Go, that frequently top best-seller lists at prepaid carriers. Honor, a brand owned by Huawei, operates in the U.S. exclusively through direct sales and frequently undercuts Motorola’s best efforts. Take the Honor 7X, which equals the Moto G5 Plus in most respects but still managed to launch at $30 less.

For consumers, obviously this is a great thing. Increased competition leads to better products and more choice. It’s easy to forget how good we have it; five or so years ago, it was hard enough to find a phone that cost as little as $200 unlocked. Even if it did, good luck getting that phone to survive a full two years.

Honor 7X

Honor 7X

But uncertainty is looming on the budget phone front. For as much as it’s been a remarkably fruitful time for budget shoppers, it could all come crashing down very soon — at least here in the United States. China’s Huawei and ZTE are under the microscope of U.S. lawmakers, albeit for very different reasons.

Huawei, one of the world’s largest phone makers, is currently at odds with U.S. lawmakers over alleged ties to the Chinese government, though the feds have yet to really detail those concerns.

“We absolutely weren’t counting on [Huawei and ZTE’s troubles]. However, it does bring some new opportunities to the table, we can’t deny that." — Marcela Lacerda, Motorola

Still, that wariness was enough to pressure AT&T into squashing its partnership with Huawei on the eve of the Mate 10 Pro’s launch and for Verizon to reportedly back away, too. The Mate 10 Pro was intended to lead Huawei’s push the U.S. market; without support from a major U.S. carrier, the device has languished on shelves of online retailers. Best Buy dropping the company’s products certainly didn’t help any, either. And now Huawei is reportedly looking beyond the U.S. for future phones.

Unlike Huawei, ZTE may not have any choice in the matter. Its entire global smartphone operation is in serious jeopardy since the U.S. Government handed it a seven-year ban preventing it from exporting any American-made components for use in its products.

The ban stems from findings that ZTE shipped telecommunications equipment to Iran and North Korea, a move for which the U.S. Government ordered the company to rebuke all executives involved. Apparently, ZTE paid them bonuses instead. As a consequence, ZTE is now forbidden from using Qualcomm’s processors, and potentially licensing the Android OS (or at least just Google’s apps).

Regardless of the political motivations at play, ZTE’s uncertain future and Huawei’s expansion woes stand to cripple cheap phones in the U.S. It’s good news for Motorola of course, who could once again make out with a monopoly on critically-acclaimed handsets at reasonable prices.

ZTE Blade V9

ZTE Blade V9

“We absolutely weren’t counting on [Huawei and ZTE’s troubles]” said Marcela Lacerda, Motorola’s director of marketing for North America. “ However, it does bring some new opportunities to the table, we can’t deny that. We’re definitely moving forward with our plan to occupy that section of the market.”

According to Lacerda, you can expect “a lot more efforts than previous years” from Motorola along the budget spectrum. Yet, dependable as Motorola’s offerings have been, they should never be anyone’s only option. The gap left by ZTE and Huawei is crying out for a new player to enter the space, but there are few candidates thus far. Asus has put together promising but uninspired efforts like the ZenFone Max Plus, while Blu frequently appears atop Amazon’s list of popular handsets but hasn’t convinced us that phones like the Blu R2 Plus offer anything but a low price tag.

“Motorola's phone designs aren’t direct substitutes for ZTE's large, cheap slab form factors that made them so popular with U.S. prepaid customers,” says Avi Greengart, research director at media analytics firm GlobalData. “Coolpad should also see a jump in orders, but other vendors — especially Blu — have not proven themselves capable of supporting carrier volumes with high quality.”

It’s a bleak situation when resources we all rely on are priced out of reach for those of us who could use them the most. The beauty of technology is that it gets more affordable over time — innovations trickle down and features that were once rare and highly sought-after become inescapable. However, competition is necessary to accelerate that process. After a fleeting period of real progress in the budget space, the threat of stagnation looms ahead.

Photo Credit: Shaun Lucas/Tom's Guide