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CTIA: Handset vendors flaunt their wares

Under shadow of market squeeze

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Comment The largest US wireless show, CTIA, was held last week in Florida, but proved a relatively low key event in terms of major announcements, though as usual a huge statement of the overall weight and vitality of the wireless industry.

The customary catwalk parade of new handsets, each model designed to push its vendor higher up the rankings and catch the eye of the major cellcos, had an air of desperation about it this year as the whole sector labored under the problems of Motorola, and took stock of the fact that, in a world where sales are increasingly concentrated in the hands of the top five, if Motorola can come a cropper by relying too heavily on low marging phones, so can others - and for vendors outside the magic circle, the effects could be far more disastrous and permanent.

Sony Ericsson, currently the star performer in the top five phonemaker league, is turning to a partnership with tier two manufacturer Sagem to try to move into the low-cost market in order to tap developing markets without seriously compromising its high end image and margins.

Motorola, seeking to redress the imbalance between market share and profit that it has suffered since the iconic RAZR moved into commodity land - with no worthy successor yet in sight - announced a range of new devices, including CDMA and enterprise models.

Arch-rival Nokia elected not to announce new products, but to show off the models it debuted in February at Europe's wireless uber-event, 3GSM - perhaps a tactless move given the Finnish giant's need to improve its US penetration.

Smaller companies, particularly from Japan and China, are facing huge challenges in staying in the market, but Kyocera and Sanyo hope to show how it's done, taking advantage of their experience of mobile internet behaviour, which is highly advanced in Japan, and targeting emerging niches like WiMAX.

The CTIA Wireless trade show provided the usual high profile showcase for new handsets, in a year of particular stress for the phonemakers.

The recent tribulations of Motorola have cast a pall over the whole sector. There is no room for schadenfreude here, the miscalculation at the heart of Moto's setbacks - racing too quickly for market share in low cost areas despite the consequent slaughter of margins - is one to which all the vendors are liable as they try to strike the difficult balance between scale, essential to stay in the race at all, and profits.

Every supplier needs a killer handset to pull in the high budget users and carriers and offset the rise of the sub-$100 sector, but these are hard to create for an unpredictable market and generally have a brief spell in the limelight - Motorola's iconic RAZR, which boosted its margins and profile so effectively, and which it is struggling to follow up, actually had quite a decent spell at the top of the tree.

So the jostling of the phonemakers at CTIA, each trying to convince the world that their new device is the new RAZR, had an air of desperation about it. This was especially true among the tier two manufacturers, whose future is shaky in a market that is all about scale, and where 80 per cent of shipments are from the top five vendors (Nokia, Motorola, Samsung, Sony Ericsson and LG).

The demise of BenQ's European operation, formerly Siemens Mobile and in 2005 still in the number four spot, shows how quickly even large players can come to grief and those outside the top five are even more at risk, with dozens of companies fighting over about 200 million units, while the big guns take the other 800 million.

This at least drives creativity. HTC is building on its close relationship with Microsoft to focus heavily on the relatively high margin enterprise sector, and the emerging category of "ultramobile PCs" or "internet smartphones" (the term depending on your perspective on this market, cellphone or laptop oriented). HTC's new products fall between phones and mini-laptops and are headed up by the Shift, a rectangular device that flips open to provide a seven-inch screen, running full Windows Vista, a 30Gb hard drive, a Qwerty keyboard and tri-band UMTS/HSDPA, quad-band EDGE, Bluetooth and Wi-Fi.

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Next page: Kyocera and Sanyo

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