Analysts and executives identified a number of emerging device trends during RCR Wireless News’ Inside Devices program. Key takeaways include: growing demand for devices that can move from carrier to carrier, the emergence of very low-cost smartphone manufacturers, and carrier interest in on-board software as a way to differentiate devices and manage traffic.
Portability
Operators are already paying consumers to switch carriers, and those offers usually include a payment for the customer’s current smartphone. While most people enjoy getting a new phone, carriers and consumers realize that switching would be even easier if smartphones were interoperable between networks. Manufacturers are also interested in device portability.
“It’s in the OEM’s interest to reduce the SKU count so that you have less inventory, you have less expense and you’re also leveraging the same components over and over again,” said Andrew Rassweiler, senior director of cost benchmarking and teardown services at IHS Technology. “If you can put all the band support into fewer modules rather than a bunch of smaller, discrete components you’re also saving replacement costs. Ultimately, it just so happens that that benefits the consumer because if you can have one device, then the portability of your device is increased,” he said.
Rassweiler added that although there are multiple variants of the iPhone 5S, Apple appears to be grouping carriers according to which LTE bands they support. “Apple has been spending some time, effort, money and engineering dollars to work with the component suppliers to reduce the number of SKUs, reduce the number of modules needed to support each of the different LTE bands and ultimately to maybe have one SKU for all markets,” he said.
“There is a requirement and a request to broaden antennas and to make it as much as possible a global device so that anybody can use it anywhere in the world on whichever carrier,” said Ephraim Ulmer, CEO of antenna-maker Galtronics.
Google’s Nexus 5 (manufactured by LG) is the first smartphone to support the LTE bands of three of the four major U.S. carriers. The same device can be used on the AT&T Mobility, Sprint and T-Mobile US LTE networks. The iPad Air supports the LTE bands of all four major U.S. carriers.
Price pressure
Pressure on handset prices comes from two different sources. On the demand side, the high end of the market is approaching saturation, so the lower end now has more growth potential. On the supply side, component makers are bringing chips to market at lower prices, enabling manufacturers to create high-performance phones at a fraction of the cost they would have paid several years ago.
“Love it or hate it, that’s the nature of the electronics industry, that everything’s on a very strong sort of cost erosion path,” said Rassweiler.
“As technology gets more mature it automatically gets cheaper and also you’re investing in very heavy equipment and then it gets depreciated and then you can reduce afford to reduce your prices,” said Galtronics’ Ulmer, adding that he still sees Apple and Samsung as the smartphone innovation leaders, but that Chinese manufacturers are gaining ground.
“The Chinese OEMs are very advanced and they’re doing a lot of great stuff,” said Ulmer. “They’re coming out with very, very interesting low-cost phones. … Sometimes one may ask ‘how can they even do it?'”
“That’s the question I ask myself every time I see a new phone out of China – how is that even possible?” echoed Rassweiler. He said that lower-cost chipsets are the key, and that the performance of these components is approaching that of chips found in higher-end phones. “The level of competency in the product is extremely high,” he said. “You can argue perhaps about the quality of the device, but then when you put it on the desk alongside higher-end phones, it’s pretty hard to argue. The results are tangible.”
On-board software
Lower manufacturing costs have led to a proliferation of Android devices, giving mobile operators and consumers a world of choices. Now carriers are looking to software as a way to differentiate Android handsets.
“You’re now going away from the generic OS app market and going into a more curated kind of environment,” said Javier Villamizar, president of global distribution at Brightstar. “Instead of going into the supermarket … you go more into a boutique store where somebody has done the job of selecting a few applications that are well done. …Those kinds of markets are a trend and that’s something that both operators and retailers are looking at as something that they would like to have pre-loaded in the device.”
Villamizar said that OTT messaging apps are a high priority for many operators. After BlackBerry released its BlackBerry Messenger app for Android, Brightstar and at least 11 manufacturers agreed to pre-load the app onto certain Android smartphones.
Carriers are also interested in pre-loading content onto smartphones and tablets. Games are especially compelling since mobile games generate more revenue than all other mobile apps combined. Market research firm Newzoo predicts that smartphone mobile gaming revenue will reach $13.9 billion by 2016.
On-board software is also a way for carriers to manage the explosion in data traffic that can at times cripple the network. “Operators are using on-device policy management software as really an extension of their network management solutions,” said Carla Fitzgerald, CMO at Smith Micro Software. “Being able to have radio control on the device, such that based on certain times of day or certain areas of geography that are more congested than others, they can implement policies on the device to actually turn on and off device radios,” she continued. Fitzgerald said this enables the phone to look for available clear Wi-Fi networks, or to move from 3G to 4G when a 4G signal is available. “That type of policy control allows the user hopefully to get the optimal experience, wherever they are and whatever they’re doing, and it allows some congestion relief to the operator,” she said. “But I think more importantly it allows them to offer the best possible user experience. As these market get more and more competitive, user experience becomes the key to retention.”
Representatives from Smith Micro Software, Sprint, Galtronics and IHS Technology were panelists on RCR Wireless News’ recent Inside Devices webinar, now available on demand.
