Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
In many ways, 2010 was a landmark year in consumer devices: after years of false starts, a formula for successful consumer tablets was discovered. In addition, smart phones went mainstream, new rate plans drove the adoption of data and the prepaid segment, while Internet-based video burrowed its way into nearly anything connected to a television. The big trends in 2011 are likely to be extensions of what we saw in 2010: more tablets – a lot more tablets – new smart phone platforms, and more convergence of cloud services and connected devices, whether they are in the home or your pocket. It’s much harder to predict disruptive change, but I do not expect any flying cars. Sorry.
Mobile computing
Changes in consumer behavior have made this an ideal time to launch simplified computing devices. More people need devices for e-mail and Web-based activities than for processor intensive tasks like video editing, and households are purchasing multiple computers, creating a market for more purpose-driven devices. These trends fueled the rise of netbooks (along with rock-bottom prices). However, it was still not a foregone conclusion that consumers would embrace tablets; vendors have been trying to build consumer tablet computers for over a decade without success. Apple Inc. finally hit upon a formula that works: a simplified operating system built for touch-based navigation from the ground up, with ties to existing ecosystems for apps, digital media, and accessories. Advances in hardware helped, but hardware alone is not enough, and proof of that can be seen in all the tablets shown at CES 2010 that were cancelled or revised after the iPad shipped.
In 2011 we are going to see a lot of tablets. If Apple keeps to a 12-month development cycle, the second generation iPad should launch in the early spring. Changes will likely include adding cameras and an extra 40-pin connector, subtracting weight, and possibly increasing the screen resolution. Apple already has an enormous lead in tablet-specific apps, so the big competitive question is really one of price: will Apple lower the price on the entry level model?
Apple’s main tablet competition in 2010 was from Android licensees. With the exception of Samsung Telecommunications Americas, most large vendors chose to wait for a tablet-specific version of the OS from Google Inc. That is expected as early as next month – Motorola Inc. is already running teaser ads ahead of its tablet launch at CES – and Motorola will be joined by the rest of the Android gang with devices in multiple shapes and sizes. Research In Motion Ltd. and Hewlett-Packard Co. are also expected to join the fray with QNX and webOS –based tablets respectively.
Google is also working on another simplified computing OS, Chrome OS, for use in connected notebooks. There is significant overlap between the uses of Chrome OS and Android, and if we had to handicap the two, we’d place bets on Android. Still, Google will formally launch Chrome OS notebooks by mid-year, and we wouldn’t be surprised if Google updates the OS a dozen times next year in an unlikely quest to eventually displace Windows.
With the rise of connected computing, carriers may try establishing new business models to extend that connectivity to all kinds of gadgets, the but most often connected devices will remain phones, tablets, and notebooks. The bill of materials for embedded 3G modules is still too high for inclusion in a wider array of device types, and embedded 4G modules are even more expensive.
However, the mobile ecosystem will stretch back to the digital home (with fixed connectivity). Microsoft Corp. is tying together its Xbox console with Windows Phone 7; it also has a common digital media store (Zune Marketplace) that extends from phones to Zune media players to the game console. Apple’s iTunes also works across phones, tablets, media players, and the Apple TV box. Google has not announced a digital media store (yet), but it has promised to add an app store to Google TV. Apple could do the same for Apple TV (if Apple sees a need for it; right now the company is skeptical). Motorola is formally splitting off its enterprise business and the new Motorola Mobility will combine phones, tablets, and set-top boxes. To date, there has been little interactivity between Motorola’s phones and the digital home, but that is an area where Motorola Mobility intends to invest.
Smart phone market shifts
In developed markets, even flagship phones – once the purview of early adopter techies – became mainstream consumer products in 2010. Smart phones also began taking over for QWERTY messaging phones spurred by price drops such as LG Electronics Co. Ltd.’s Optimus, which launched at $29, and tiered data pricing. While consumer advocates railed against the end of unlimited data at AT&T Mobility, offering up a $15 per month option opened up smart phones to price-sensitive consumers who had previously considered the data-centric devices out of reach. In 2011 we expect Verizon Wireless to follow AT&T Mobility’s lead to tiered data plans. Right now only Motorola is targeting smart phones for various market segments like outdoor users, teenagers, or business users, but Moto will have plenty of company next year.
The competition will also come from vendors new to U.S. national carriers such as Chinese vendors ZTE Corp. and Huawei Technologies Co. Ltd. The Chinese have been trying to make inroads into U.S. carriers for years, and have been cutting their teeth with prepaid regional carriers and T-Mobile USA Inc., the smallest national carrier. PC vendors struggled badly in 2010, and they will not succeed until they master the art of getting distribution; they can’t compete with larger vendors on cost until they themselves can sell in volume.
Smart phone hardware
Moore’s Law hasn’t been rescinded yet, and phones will get faster, either with higher clock speeds (look for the first 1.5 GHz smart phones in 2011) or by splitting the load with multi-core processors. If 2010 was the year of Qualcomm Inc.’s Snapdragon, 2011 may be the year of Nvidia Corp.’s Tegra 2. The original Tegra was demoed to death, but never actually made it to market in commercial handsets. Intel Corp. will make a lot of noise, but will not be big player in phones in 2011 as ARM architecture still offers better balance between battery life and performance.
Screen technology was a big differentiator in 2010, but there is a limit to how large screens get before the device bearing it becomes unwieldy, and a limit to how high the resolution can get before your eye can no longer distinguish the difference. We actually hit both points in 2010, so 2011 will see today’s 3.8-inch to 4.3-inch, 800×480 AMOLED start trickling down from vendors’ flagship phones to more ordinary models.
Google is adding support for near field communication into Android 2.3, and it stands to reason that several Android phones in 2011 will include the corresponding NFC hardware. However, at the moment there isn’t anything useful you can do with NFC in the United States, and until that changes, NFC won’t be a sales differentiator.
Video calling was once a promised use case for the move to 3G networks. It didn’t take off then and it may not take off now, but don’t tell that to handset vendors, as front facing cameras will move beyond flagship models, too. However, don’t feel too bad for flagship phones. They will still be able to differentiate themselves with a new imaging technology: pico-projector modules are getting small enough to move beyond a defining characteristic and become a high end feature.
4G networks will be rolling o
ut around the world in 2011, so it is a given that we’ll see plenty of 4G phones. Clearwire Corp.’s WiMAX and Verizon Wireless’ LTE coverage footprints are neck-and-neck entering the new year, AT&T Mobility is planning LTE deployments in the second half of the year, and many operators in Europe and Asia are planning to begin LTE rollouts (at different frequencies) by the end of 2011 as well. However, coverage will not be universal and carriers are migrating to and from different technologies at different frequencies. This means that most 4G phones will be multi-mode and custom made for a specific carrier, favoring vendors whose technology and business models are flexible and carrier-centric such as HTC Corp. and Samsung.
Sadly, we expect no significant development in batteries. Vendors will continue to make improvements in other areas to ease the battery cruch – everything from more efficient operating systems to multi-core processors can help. However, increased consumer usage of phone apps and services tends to outpace incremental battery savings (I’d like to call this “Avi’s Law.” Hey, a guy can try.)
Verizon Wireless iPhone (or not)
Apple is widely expected to launch a CDMA iPhone for Verizon Wireless in January. Or March. (Or never – every prior rumor has proven incorrect). One thing is certain: in June, the fifth generation iPhone will be available for AT&T Mobility and networks around the world, and all eyes will turn to see if Cupertino can stay ahead of its rivals. I expect the iPhone 5 to be more about software than hardware – new user interface elements, new extensions for social networking, perhaps a home grown navigation app – all wrapped in an antenna coated to avoid finger interference.
A big year for mobile platforms
As we enter 2011, only two mobile platforms have reached critical mass in both device sales and developer commitment: Apple’s iOS and Google’s Android.
Microsoft’s Windows Phone 7 has had a strong launch for what is essentially a 1.0 product. Consumer sales have not been great, but by applying generous cash incentives, modern APIs and best in class development tools, Microsoft has already has moved into (distant) third place in the apps war. Microsoft sees mobile as strategically crucial to its future, and can be expected to iterate its way forward in 2011. The first update will add cut and paste, but to be fully competitive Microsoft will have to address multitasking, a properly functioning landscape mode and server-based device management for enterprise users. Microsoft also has a lot of features to catch up on (for example, there is no way to set an “out of office” message in the e-mail app).
2010 was supposed to be the make-or-break year for Palm Inc., and, in a sense, it was: afraid of going broke, Palm sold itself to HP. That makes 2011 the make-or-break year for webOS, a critically acclaimed mobile OS all but ignored by consumers. HP is expected to move webOS into higher-end handsets, tablets and printers, but if the tablet effort fizzles, it will likely end up as an internal HP technology.
Local vendors are nipping at Nokia Corp.’s dominant market share in feature phones for emerging markets, but Nokia retains structural advantages in scale and distribution that will keep the Finns strong in those segments for years. Nokia’s real problem is at the high end of the smart phone market. Symbian has lost mindshare to Apple and Google for years, but only recently has its market share started sliding off a cliff. With developers unwilling to commit to the platform, Nokia is betting on its Qt software development tools, which can be used to build apps for Symbian or the upcoming MeeGo OS. MeeGo is probably Nokia’s last chance to try to reenter the U.S. smart phone market.
RIM continues to be the platform of choice for security-conscious enterprises, and its Curve and Pearl lines are doing exceptionally well with consumers in markets outside North America. However, RIM is losing ground to Apple and Google in the United States, particularly at the high end. If RIM can maintain its current sales pace without dropping its margins too low it will have a chance in 2011 to transition the high end of its line to QNX. That could set up RIM to regain North American market share in 2012.
Avi Greengart is the Research Director for Consumer Devices at Current Analysis. Greengart is responsible for the Mobile Devices and Digital Home Devices groups, including CurrentCOMPETE (market, company, event, and device competitive analysis) and Wireless Tracking (pricing, promotions, availability, and device feature data and analysis) content.
