Forces swirling throughout the wireless industry are clearly shaping handset offerings expected to reach U.S. consumers in the second half of this year.
While that pattern has been typical in the industry in recent years, the pace of competition has quickened and the types of innovations reaching the market reflect new market realities.
“The release of [Apple Inc.’s] iPhone last year and the imminent release of an update set a lot of reactions in motion from carriers and their handset vendor partners,” said Ross Rubin, analyst at NPD Group.
Thus, touch navigation, haptics, QWERTY keypads and large displays – iPhone features and features absent from the original iPhone – are expected in products later this year.
These innovations are, of course, beginning to show up on shelves and likely will accelerate in the second half, Rubin said, as will the ramp up in 3G-capable handsets, especially on the GSM technology side.
Priming the pumb
Handset vendors have been making specific announcements timed to June-July launches and vague hints about the fourth quarter that reflect these new realities.
Nokia Corp., for instance, has promised a renewed presence at U.S. carriers, even while its share continued to flag in first quarter – and it has said a major touchscreen effort would hit the market in the fourth quarter. Sony Ericsson Mobile Communications has taken a similarly carrier-savvy approach to boost its share here, at least among GSM carriers and has announced that its HSDPA-enabled Z780 is due on American shores.
HTC Corp. just globally launched its Diamond handset, a high-end effort intended to carry forth its own brand-building efforts, due in the U.S. this year. And, of course, Apple is anticipated to deliver a 3G-enabled iPhone, perhaps next month. Research In Motion Ltd., now No. 6 in the world, according to IDC, is expected to deliver three or four devices to cement its position and parry Apple’s move into the enterprise space.
One major factor hanging over this brave new world: observers are eager for signs of the effect a sluggish U.S. economy may have on consumers facing a pinch on spending. Prepaid services and handsets may be first to take a hit, Rubin said.
Online habits changing
Miro Kazakoff, analyst at Compete Inc., pointed to the growing number of Americans who use their mobile phone as their main number, replacing their landline, which could help or hurt the industry, depending on whether they step up or cut back their wireless commitments in a downturn. Whether a downturn has a disproportionate effect on the high-, mid- or low-tier handset offerings due in the second half will be closely watched, Kazakoff said.
How will the innovations due in the second half of the year be received by the consumer, downturn aside?
“Over the past year, we’ve seen a change in consumers’ online shopping behavior,” said Kazakoff. “Visits to carriers’ Web sites is flattening, while traffic to handset OEM Web sites and to the mobile phones on big-box retailers’ sites is growing.”
Specifically, average visits to top-tier carrier Web sites has dropped 1.2%, while visits to handset original equipment manufacturer sites is up 26%, Kazakoff said. The relative dominance of the carrier retail channel continues (with an average of 33 million visits per month for all top-tier carriers) but with consumers largely having decided on their carrier, the OEM Web sites are gaining in interest (2.5 million average visits per month).
“Handsets are becoming more important to consumers’ purchase decisions as the carriers deliver more uniformly quality service,” Kazakoff said.
That means that carriers and OEM partners will more closely target well-defined consumer segments – one of the drivers of the product launches due in the second half, Kazakoff said.
“We’ll see more specialized phones – from multimedia to fashion – as carriers segment their customer base more finely,” the analyst said.
