The news that India’s government plans to delay the launch of 3G services in that country is probably grabbing attention in the executive suites of the world’s most ambitious handset vendors; India’s market potential is enormous and among the fastest growing on the planet. But roadblocks to growth in India loom large.
The 800-pound gorillas of the mobile handset business, however, are pretty close to the ground in India and, according to Strategy Analytics’ Chris Ambrosio, director of the firm’s wireless device strategies service, probably have not counted on 3G in India-or China, for that matter-in their near-term forecasts for handset shipment volumes. Therefore, the juggernaut-like handset business for this year likely remains on track.
“I think the real threat lies in long-term profitability, since the long-term profit picture lies in 3G volumes,” Ambrosio said. “These markets do have to come online in the next three years or so in order to sustain that ramp of [average selling prices], volume and profitability. And the potential for volume sales in India is outrageous over the next few years.”
At least India is making public pronouncements on the fate of 3G services. In contrast, “the uncertainty in China has been a long-running issue,” Ambrosio said.
The potential for 3G sales in both countries is substantial and, to a degree, belies the cliched notion that “emerging markets” mean low-cost handsets. Certainly, Motorola Inc. has made inroads in India by supplying entry-tier handsets at the sub-$40 level via the GSM Association’s Ultra-Low Cost Handset program. But Nokia Corp., with savvy marketing and well-run distribution channels, achieved a 63-percent market share position in India last year by selling handsets with features that command the next higher price tier, according to Ambrosio.
“Nokia is the preferred brand there,” the analyst said. “They are so strong.”
When 3G services are launched, what will the uptake patterns look like?
Ambrosio pointed to both India’s and China’s large cities, where per-capita income is high, business is strong and, often, there are multinational corporations. In these cities, executives, “prosumers” and well-heeled consumers snapped up handsets and services across price points as they became available.
“That’s where the growth happens first,” Ambrosio said. “When higher-priced handsets are made available, they have the money to buy them. So the first stages of 3G growth should be encouraging.”
And who stands to benefit?
Ambrosio said that those 800-pound gorillas with brand power will have the advantage in India, which may become another battleground for Nokia and Motorola as the two duke it out for global hegemony. China, as one might expect, is another matter.
“China, with its emphasis on TD-SCDMA-their domestic flavor for 3G-is different,” Ambrosio said. “If the Chinese continue that emphasis, the major international brands won’t be able to push as broad a product portfolio. There are a number of local manufacturers allied with chipset vendors that will make China’s 3G market more of a level playing field. Brand power, however, still favors Nokia and Motorola. I don’t see any domestic Chinese vendor being able to stand that market on its head.”
With India at least going public with its official delay of 3G services, what to make of China and its opaque bureaucracy and ponderous pace?
Asked his take on the Chinese puzzle, Doug Grant, head of wireless business development for chip-maker Analog Devices Inc.-which has relationships with original design manufacturers that feed the Chinese market-said 3G license awards could come tomorrow, or in two years. His conclusion is almost Confucius-like.
“In China, when you ask 10 different people when 3G services will launch,” Grant said, “you get 20 different answers.”
