New Entrants Poised to Join Smartphone Market

The number of players in the global smartphone market is set to substantially increase between 2010 and 2015, according to a new white paper from Juniper Research . Apple Shows the Way ³Vendors Vie for Smartphone Market Position´ credits the Apple iPhone with opening the smartphone market to a wider array of providers. By linking the hardware device, the smartphone, to a content delivery platform, the App store, Apple has managed to create a powerful hardware/ content combination. Thus Apple has removed one of the main barriers to entering the smartphone market: how to generate revenue out of content. Hardware Advances Will Likely Spread Successful advances in hardware may spread rapidly to all smartphone manufacturers. Several important developments in particular will likely be seen during the next five years: 

Smartphones will increasingly be equipped with HD video recording capabilities. Several handsets already have HD video recording available such as the Samsung OMNIA I8910 HD and Sony Ericsson¶s Vivaz. Economies of scale will reduce the cost of this component as more OEM handset vendors will adopt HD video. High-end smartphone devices are expected to have dual core processors by the end of 2010; by 2012, most smartphones will have dual core processors. (With a dual core processor, different applications can be split between the processors, saving on battery life and improving processing speed.) New form factors are expected to emerge particularly as smartphone devices become smaller, typically to the size of a standard handset. Samsung¶s pico projector phone, called Beam which was launched at Mobile World Congress 2010, is expected to be the first of several handsets that are equipped with projectors to get over the problem of limited screen ³real estate´ inherent in the smartphone device. 3-D technologies for video and still photos are being developed by several handset manufacturers. This is achieved by mounting two cameras on the device to replicate the distance between the eyes.    

majority of the market will be taken by closed OS manufacturers such as Apple and RIM. it appears. new smartphone market entrants (such as Dell. will represent roughly the same marketshare in 2015. Microsoft already has its own mobile OS. but still substantial. Acer and Huawei).Dell and Acer are planning launches. or. for that matter. is Microsoft.´ . which have virtually no presence in the current smartphone market. will account for a much larger share of the total market. despite its massive dominance in the OS market. but has shied from the hardware market even in PC domain. forecast to encompass more than 26 million shipments. taking out the superlatives from the first lines of its press release gives us: ³Palm¶s « operating system provides a «platform to expand HP¶s mobility strategy « [over] multiple mobile connected devices. A smaller.2 billion is a sign of the times: at least three other major electronics players are looking to enter the smartphone market this year. of detailed in the chart above. as. Other providers. For HP¶s part. which also currently have almost no presence. such as Google. HP is also a new entrant in smartphone market the definitive agreement for HP to purchase Palm and the Palm webOS mobile operating system for $1. And its not as if the smartphone market is lacking in competition. new entrants.

Screens. a figure that does not include iPhones from Apple Inc.The phrase is telling. Palm may have lost out to other players as the PDA was superceded by the smartphone but HP now has the unique chance to revive it. 2011 will see domestic Chinese suppliers focus mainly on EDGE smartphones based on the Android operating system. One only has to look at the success of the IPad to realise that connectivity will be at the centre of the next generation of consumer electronics devices. barriers to entry have been coming down for some time. casings and SIMs can also all be bought en masse for assembly. Overall gray-market handset shipments are projected to expand to 255 million units in 2011 and then begin to decline to 213 million units in 2012. even the operating system is open for any company to develop into its own-brand handset.1 million units.if you are big enough. And in the device market. With open source. according to new IHS iSuppli Research. the one asset that HP is purchasing not mentioned in the release is Brand. Many aspects of the PC market are now ³commoditised´. IHS forecasts that Chinese companies will ship 111. up from 35 million units last year. As for HP.0 million smartphones. with the overall number of smartphones to continue rising in the years to come. Others regional players The domestic smartphone market in China is set for record growth in 2011. that have been smuggled into the country or phones made by HTC that are sold into China²estimated at somewhere in the range of 7 million units in 2010. batteries. with shipments growing 53 percent to 54. chips. And Brand is becoming more and more important in a market where differentiation is harder and harder to achieve (though Apple still excels). This will launch a pattern where gray-market handsets continue to decrease in unit shipments for the next four years. more than 10 million smartphone units will come from the giant Chinese makers ZTE and Huawei. By the end of 2015. as well as 3G smartphones from 2012 onward. Of the projected domestic total for this year. Meanwhile in the Chinese white-box and gray-smartphone market. hence the interest from the consumer electronic giants. And Michael Dell has demonstrated what can be done with a commoditised market. Dell¶s smarphone efforts will be concentrated on Brazil and China. with few differentiating factors but price. . it appears.

players in the emerging markets. a lack of new and compelling selling features will result in price-based competition. following the sharp decline of the export white-box and gray-handset market in April and May. with the gray-handset market anticipated to see lower revenue despite an increase in unit shipments. the increasing effort of gray handsets in differentiating from similar platforms. IHS saw the closure of many small independent design houses for handsets in the Shenzhen area because of continuous losses. such as tablets. supplying product to their own areas. with cooperation from local operators. adding to the pain of local gray-market manufacturers China's ZTE. are grabbing market share away from grayhandset suppliers. In the second quarter of this year. Huawei. Moreover. such as those operated by big entities MediaTek or Spreadtrum. Moreover. the change from some traditional gray-handset suppliers into branded original equipment manufacturers that promote their own trade names in the developing countries. aims to boost its smartphone sales in 2011 by five times. Existing players also may leave the smartphone space altogether to seek greater opportunities in other consumer electronic sectors. the expansion in market share of dominant local players like ZTE. and the lack of a cost advantage in gray handsets when compared to 2G phones. the Chinese government cracked down hard on illegal gray handsets and the suppliers of counterfeit phones in Shenzhen during that time. Other factors include concern from end customers about the quality and aftersales services of gray handsets.While gray-market suppliers are positive about prospects in the emerging markets. TCL/Alcatel and Sangfei into the developing countries. . including stronger supervision by the Chinese government of gray-market handsets and a serious crackdown on counterfeit mobile phones. while demand declined in the emerging markets during the second quarter. Channel inventory had been too high in the first quarter of 2011. as well as the absence of a competitive 3G turnkey solution for gray handsets in the near future. Several factors account for the decline in the shipment of gray-market smartphones in China. This is true even in 2011. which has made big gains in mobile phone market.

3 operating system.8 million units. has compounded the industry's woes. according to research firm IDC. With cheaper rival offerings and a falling rupee cutting short their dream run. Leading companies like Micromax. ZTE announced a new strategy for smartphones at the Mobile World Congress. International Data Corporation showed a 3% quarter-on-quarter decline in Indian mobile phone shipments during April-June at 42. ZTE.0 in the third quarter. The company's recent success was due to its rapidly expanding smartphone line. Zen. IDC added in a report. too. Micromax has lost its pole position among Indian handset makers. On Monday. "Local handset makers would have to change their strategy from simply borrowing low-cost designs and mass producing to innovating and creating locally relevant products. a development that even could price them out of the market.8 million handset units.000-crore cellphone market. as chief executives project zero margins if the dollar touches the 55 mark. During 2010. Maxx and Olive have begun to set up new research and development wings to design and make their phones in India. Karbonn. an increase of 94 percent from the previous year. . ZTE shipped a total of 51. ZTE finished as the fourth largest mobile phone vendor with a 4. Lava. Called the Skate. breaking away from the practice of buying off-the-shelf designs and getting them manufactured on contract in China. putting it ahead of Apple's 4 percent share. Local companies would have to come up with some core innovation to differentiate. data shared by market research agency GfK showed. homegrown handset makers are planning a complete makeover by reducing dependence on design and contract manufacturing in China to hold on to their slipping share in the 30. create own software for operating systems and mull app stores. According to research firm Gartner. the likes of Lava and Micromax have been forced to raise prices twice in three months. even as the company has historically focused on the lower and middle-end markets. the company said. the device has a 4." Sales of domestic players have either remained stagnant in the past year or have gone." says London-based Analysys Mason's India director Kunal Bajaj. Nokia. In the fourth quarter of 2010. As it is. with the goal of developing more smartphone. is also a global manufacturer of handsets for mobile carriers. The strategy focuses on the middle and high-end markets. "Indian handset makers had lost market share during Diwali because Samsung got better devices in the market and Nokia got back with differentiating handsets. Spice. tablet and Internet TV box devices. a Chinese network equipment supplier. The company also showed off a new low-cost smartphone at the event. Samsung and LG Electronics lead as the top three.The company is targeting a shipments of 10 million units.2 percent market share. The fast depreciating Indian currency. overtaken by Karbonn Mobiles as the leading Indian brand as of the third quarter this year. an increase from the 2 million units sold in 2010. The company also announced plans to launch a tablet running Android 3. ZTE said it will start shipping the smartphone globally in May.3-inch screen and uses the Android 2.

Rai said."It's a fine linea. patented user interface and an operating system to create its own intellectual property. they would have to be careful of investing in these overheads since they operate on low margins that run the risk of becoming thinner due to the rising dollar. This technology enables a user to operate a Superfone simply by hand gestures. "It's not a dream run anymore. . which has invested more than $10 million in R&D." says Lava Mobile's co-founder SN Rai. ranked after Nokia. is spending Rs 100 crore on its design. One such effort is a gesture control engine on our Superfone device. "Around 50-60% are our own models and the rest come from original design manufacturers. Indian R&D push Micromax. "There's a cost saving of 15-20% from having your own design and common inventory." Karbonn Mobiles. However. So making its own models has solved a lot of quality problems for Lava. is working on a unique product architecture." Gartner's principal analyst Anshul Gupta says the Indian companies have to innovate." said Micromax's co-founder Rahul Sharma. Most companies are banking on internal accruals. "We are working towards manufacturing feature-rich smartphones. they may become obsolete since there would be nothing to differentiate them from the clutter. this percentage will go up. is hiring more people at the Bangalore centre. which invest nearly 10% of their global revenues into R&D. If they continue to under-spend and only copy designs. It is expected to form a venture with an R&D centre that has presence in India and Europe in the next quarter. If there is no differentiation then they won't be able to survive in a market overrun by brands. an executive said. companies will have to maintain a tricky balance. adding that he is considering creating an India-focused app store. on the lines of Nokia and Samsung. Chinese contract manufacturing is of poor quality and there is little after-sales service. The Noida-based company. Lava is talking to chipmaker Qualcomm and technology firm Mediatek for co-developing user interfaces on mobile phones the company's internal design and development team is planning to come out with nine models. is stepping up funding to form a separate division for in-house research to a create a smartphone range "rivalling Nokia and Samsung's". giving it more control on quality. "It is mandatory. the largest Indian-owned brand by sales. amassed during their hey-days. They are also considering channeling part of their revenues into in-house research." Rai said. one of the top five local handset makers. Samsung and G'Five in India. supply chain and a substantial part in research and development centre in Bangalore." Bajaj said. Lava Mobiles. which already has 100 people in its China team. to fund their R&D efforts. Slowly.

Sign up to vote on this title
UsefulNot useful