NEW YORK-In the short run in the U.S. analog cellular phone equipment market, Nokia Corp. and, to a lesser extent, L.M. Ericsson, have gained ground on industry giant Motorola Inc. But the bigger question over the longer run is how meaningful this market share snapshot is as an indicator, given the rapidly changing dynamics of this sector, industry analysts said.
This is the picture today. Motorola, which controlled more than 60 percent of the handset market when cellular telephony got its start in this country a decade or so ago, has been gradually losing some market share in recent years. Whereas Motorola controlled half of the market two or three years ago, its share now is estimated at about 40 percent to 45 percent.
Nokia, which made a major marketing push in the United States in the past year, has doubled its market penetration to roughly 20 percent-despite recently publicized difficulties it has experienced due to rapid growth. It has done so not solely at the expense of Motorola, but also at the expense of the smaller Japanese players, like Fujitsu Network Transmission Systems, according to Mark Cabi and Nikos Theodosopolous, telecommunications equipment analysts for Salomon Brothers Inc. and UBS Securities, respectively.
Ericsson, which offers high-end analog handsets, “is not a big but a growing presence, with about 5 to 10 percent of the U.S. market,” Theodosopolous said. Its primary strength is in the more complex digital technology.
“People keep seeing Motorola’s share going down, but the sheer volume has increased over time, and they certainly are shipping more phones than ever,” said Tom Ross, a cellular industry analyst for Economic And Management Consultants International Inc., Washington, D.C.
The problem, however, is that at least until personal communications services start in a year or two, the United States likely will be a stagnant or declining market, said Ian Gillott, manager of wireless communications research for IDC/Link, Austin, Texas. Even if PCS takes off here, the real growth opportunities for equipment manufacturers are abroad, in locales where wireline infrastructure is poor or non-existent: in European countries like Hungary, Italy and Spain; in Latin America and the Asia Pacific nations.
Because analog technology is entrenched here, and is useful for cellular roaming, it isn’t likely to disappear, at least for 10 to 15 years, Gillot said. But with the top 10 cellular carriers dominating 95 percent of the market, and all moving into PCS, dual-mode cellular phones are the obvious next generation. A single-mode analog handset, regardless of advanced features, will soon go the way of the eight-track audio tape, he said.
Looking out past 1998, Gillott predicted that all kinds of cellular phones will become disposable consumer electronics, like compact disk players. At that point, some of the Asia-based manufacturers, which have seen their market share dramatically reduced or eliminated by Motorola and Nokia in this country, will have the opportunity to rebound.
“These phones will be manufactured in China and the Phillipines by Samsung, Sony, Panasonic, Toshiba, companies with a brand image for reliable, cheap electronics,” Gillott said.
EMCI’s Ross took a different view. “Cellular phones are not like stereos, televisions or cars because of the extra element that they are linked to the service provider,” he said. “This makes it somewhat of a unique market, especially as carriers become more national in scope, and wireless voice-traditionally completely mobile-gets into fixed types of applications with the introduction of PCS and digital technology.”
Consequently, Ross said that equipment vendors who succeed and dominate will be those who focus on and anticipate the needs of carriers, and who can provide bulk quantities of units.
Cabi of Salomon Brothers predicts there will be more, not fewer, equipment vendors vying for a piece of the domestic market, “if the technology moves to better quality and spectral efficiency.
“It took 10 years before we were at a point of many competitors in analog. There are about three to six viable digital players now. That will probably go to eight to 12 by 1997,” he said.
