The average selling price (ASP) of smartphones will dip 12.8 per cent to $337 this year (from 2012's $387 ASP), says analysts IDC.
It expects this trend to continue with the ASP set to fall to $265 by 2017, with more low-cost Android phone manufacturers entering the market.
However, IDC also says that smartphone shipments are expected to surpass one billion units in 2013 - some 39.3 per cent growth over 2012. By 2017 it predicts 1.7 billion smartphones will be sold worldwide annually.
"The game has changed quite drastically due to the decline in smartphone ASPs," said Ryan Reith, Program Director with IDC'sWorldwide Quarterly Mobile Phone Tracker.
"Just a few years back the industry was talking about the next billion people to connect, and it was assumed the majority of these people would do so by way of the feature phone. Given the trajectory of ASPs, smartphones are now a very realistic option to connect those billion users."
Ramon Llamas, Research Manager with IDC's Mobile Phone team, added: "The key driver behind smartphone volumes in the years ahead is the expected decrease in prices.
"Particularly within emerging markets, where price sensitivity and elasticity are so important, prices will come down for smartphones to move beyond the urban elite and into the hands of mass market users. Every vendor is closely eyeing how far down they can price their devices while still realising a profit and offering a robust smartphone experience."
In Europe alone, the smartphone ASP is set to fall from $419 in 2013 to $259 in 2017.