The company will release a mobile handset's operating platform - Nexperia Cellular System Solution 5130 - by this year-end. This less than US$5 core component is an integrated hardware and software constituting all the electronics a mobile phone needs.

It will enable Philips and others to retail the ultra-low cost GSM mobile handsets at less than $20. These handsets will have a black and white screen. Its users will be able to exchange SMS and play polyphonic ring-tones.

Fast-growing emerging markets having low mobile penetration are the target of Nexperia-powered ultra-low cost handsets. According to World Bank and EMC World Cellular Database, 77 percent of the world's population lives within the mobile phone network coverage.

Only 25 percent of the world's population, however, uses mobile phone. Operators have deployed the infrastructure but the high start-up cost of mobile phones has been holding back potential subscribers.

Philips believes an untapped clientele of 3.3 billion around the world would be the beneficiary of cheap mobile handsets. It hopes to further reduce the handset's retail price below $15 by 2008.

Earlier this year Motorola launched C114, the world's first ultra-low cost mobile phone, with $40 price tag for the emerging markets. It was the American vendor's first step towards a sub-$30 handset target.

The Dutch multinational's $20 entry with possible further price reduction will heat competition soon after the Nexperia-powered handsets hit the shelf.