The landscape of the wireless industry is in flux as you read this story, with product launches, pre-announcements and hype flying by like so much confetti on the wind.
Or is that confetti actually the cellular industry after being fed through a shredder?
The traditional cellular industry itself is morphing, too – if not in actual tatters – as newcomers from Apple Inc. to Amazon.com to Garmin Ltd. market devices that take their traditional strengths – multimedia, books and personal navigation, respectively – and add cellular connectivity to offer voice and data, plus myriad other functions.
Handsets and personal computers are being merged in the ultra-mobile PC space that promises some bizarre hybrids. And the 700 MHz auction and the great WiMAX question – will it or won’t it fly in the United States? – blow like winds of change across the now-hazy horizon.
The top-tier handset vendors of yore – say, a year ago – remain in relatively static global rankings, with the exception of Motorola Inc., which still needs to find the ripcord to stop its freefall. Global rankings, of course, are largely based on high volumes of handsets heading for emerging markets. But the need for a balanced portfolio to exploit all opportunities, with increasing reliance on mid- and high-tier offerings for their futures, remains an oft-cited driver for product development.
Conversations with numerous analysts suggest that, put simply, the game of global hegemony is Nokia Corp.’s to lose, while innovation will be driven by an increasing broad cast of characters.
Catching Apple
At the high end, the market is still reacting to, or performing parallel development on, Apple’s embrace of a user interface that is at
once fun, simple and intuitive. That basic achievement, which rides atop the monster marketing machine that is Steve Apple Jobs, produced first the term-of-envy “iPhone killer.”
That development has driven a wave of fascinating device options that, if not “killers” or head-on competitors, at least chip away at the iPhone’s multi-faceted appeal, searching for a chink in the newcomer’s armor. Analysts said that Apple would look to broaden its cellular portfolio, while the top-tier vendors joined by the likes of Research In Motion Ltd., HTC Corp. and even tiny but resolute Neonode would continue to generate wave after wave of challenges based on price, features, form factors and user interfaces. That will keep the smartphone space – roughly 13% of the overall market today, but forecast to be up to 30% by 2012, according to ABI – quite cutthroat for years to come, according to ABI’s Shailendra Pandey.
Nokia’s challenge
Among the top-tier global vendors, Nokia has emerged in such a dominant position that iSuppli Corp.’s year-end assessment variously dubbed it “Godzilla,” “the Finnish wireless behemoth” and “the monster of the mobile-handset business” – while noting its weakness and, thus, exposure in CDMA markets such as the United States. iSuppli also noted that Nokia is quietly taking steps to recover here, while Motorola’s domestic share slowly eroded.
While the loyalty of first-time customers in emerging markets typically comes with brand stickiness, mid-tier feature phone and smartphone owners are prone to explore other brands when they upgrade, said Pandey – which could prove to be the Achilles tendon of “the behemoth.” That means providing a high-end option to the iPhone without stooping to crassly follow its lead, which Pandey said Nokia is bent on achieving through an improved user interface.
Meanwhile, “Nokia has taken the lead among handset vendors in approaching Internet-based services,” Pandey said, which may well provide the handset giant with a major new revenue stream – if it’s successful. The “monster’s” recent decision to buy Trolltech (see related story on page 19) is a step in realizing that ambition, according to several analysts.
Table scraps
Pandey credited Samsung Electronics Co. Ltd., Sony Ericsson Mobile Communications and LG Electronics Co. – the No. 2, 4 and 5 handset vendors with avid pursuit of both emerging markets and cutting-edge designs for the upgrade cycle in mature markets, while each has its own set of weaknesses and challenges. Together, Pandey said, the top five vendors hold 83% of the global market, which leaves 17% for all other players, including the innovators noted earlier.
“What’s happening is that these smaller players rise and fall on the fortunes of the big vendors,” Pandey said. “These (smaller) vendors look more interesting if you focus on the growing smartphone segment. The smartphone segment is where you get maximum return on investment. It’s the best place for new players, the fastest growing and the most exciting to watch.”
