CTIA: Handset vendors flaunt their wares
Under shadow of market squeeze
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.
Kyocera and Sanyo
We saw last week the difficulty that Japanese and Chinese players will have in competing in the global market because of their dependence on their close ties with home operators and their small market share (one per cent worldwide for Japan's phonemakers). But they continue to play the game, with Kyocera showing off WiMAX devices at CTIA, as well as research-driven handsets that are highly targeted to specific applications or consumer groups - like the M1000 Qwerty slider designed for messaging, or the flagship slim flip-style E5000.
Kyocera's unique selling point has often been support for a wide variety of air interfaces - it is the only major manufacturer still focused on the iBurst system invented by Arraycomm, for instance, and worked closely with Qualcomm on 802.20. This stands it in good stead to attack the multimode device sector, and it has announced a WiMAX PC card that will soon be joined by a WiMAX/CDMA product - following a similar mode unveiled recently by Sanyo.
Kyocera hopes to expand its presence outside Japan by leveraging its wide range of technologies and the experience it has of advanced mobile internet and multimedia usage in its home country. The aim is to incorporate such functionality into its handsets before western consumer bases even know they want it.
"Kyocera is seeing a tremendous expansion in the consumer applications for mobile devices, ranging from streaming music and television to on-the-go payment platforms," said Dave Carey, vice president of strategic planning at Kyocera Wireless. One of Japan's successful mobile applications has been payments, and Kyocera showed a Visa-based system running on its WiMAX PC card and a new Wi-Fi/CDMA handset. It showed how beverages could be purchased from vending machines by presenting a payments-enabled handset to a contactless payment spot.
Also demonstrated were streaming mobile TV sessions transmitted at speeds up to 20Mbps through the MobiTV software platform to the WiMAX card. Kyocera is using WiMAX chips from Runcom.
"When it comes to consumer electronics, a common perception is that countries like Japan bring the newest technologies to market first, and eventually these technologies arrive in the west," said Tom Maguire, VP of global marketing, product planning, and design at Kyocera Wireless.
Sanyo, though it also has the benefit of experience of the advanced Japanese consumer market, and has been early into combining CDMA with WiMAX and Wi-Fi, seems to be having a harder struggle. Although, when it dissolved its mooted joint venture with Nokia for CDMA handsets, most of the focus was on the failure of the Finnish company in this market, it was also the loss of a significant opportunity for Sanyo to achieve greater market presence. Mobile phones may be one activity that the company chooses to exit altogether, following in the footsteps of other companies like Alcatel and Siemens, which recognized that a tiny percentage share is sometimes more damaging than no share at all in this volume segment.
Sanyo's president Toshi Iue said last week that he would resign on 2 April, ending his family's leadership of the company and potentially signalling the sell-off of various units, possibly including handsets - Iue has been highly resistant to calls by Goldman Sachs, brought in last year to help bail out the company, to break it up.
Facing a group net loss of ¥50bn ($426.4m) in the current financial year ending 31 March, Iue's successor, current vice president Seiichiro Sano, said sell-off was a possibility. "As for the issue of selling our mobile phone and digital camera operations...this is not something that can be decided lightly. I am still settling on a plan for fiscal 2007," he said.
Motorola's own latest attempts to fill the gap at the top end left by the commoditization of the RAZR range from enterprise products, targeted at a market increasingly commanded by Nokia, to new media-oriented phones. The MC35 EDA (enterprise digital assistant) is a rugged candybar with barcode scanner, the fruit of last year's acquisition of Symbol Technologies and already snapped up for enterprise customers by AT&T; and the Moto Q9H, which has a multimedia and messaging focus with HSDPA.
Motorola also unveiled four GSM handsets ranging from the W218, which features an FM radio and VGA camera, to the flipphone W380, which has instant messaging, SMS, and MMS messaging functions.
The company also showed off four CDMA handsets for a market where, although it is free of the usual competition from Nokia, it faces revitalized efforts from LG and others. The CDMA devices are heavily focused on media and entertainment, sporting digital cameras, music players, and support for over-the-air music and video downloads. They include a CDMA version of the RAZR maxx for W-CDMA networks, which AT&T is already selling - verizon will offer the CDMA variant - and a CDMA implementation of the ROKR music phone, dubbed the Z6m.
In addition, Motorola introduced a new version of its CDMA universal base station along with its low power Picocell M810 device used for deploying wireless hotspots.
Sony Ericsson and Sagem
Currently, the company that can do no wrong in handsets is Sony Ericsson, which in the most recent quarter achieved the apparently impossible feat of increasing both margins and market share, relying heavily on its Walkman brand.
At the recent Smartphone Summit it introduced the latest device under this brand, the W580 for North America, a slim slider geared to music services. It also introduced the Z750 for the North American market, an HSPA/Edge device focused on mobile email, though it does not yet have a carrier.
However, the Japanese-Swedish venture will face a balancing act challenge of its own soon, following its announcement earlier this year that it would focus heavily on expansion in the low cost Indian region. It now seems to be trying to avoid the Motorola problem by steering clear of designing its own phones for this push, instead retaining its concentration on high value products, and turning to France's Sagem to produce the low end models - a major coup for Sagem, which itself faces a difficult future at the wrong end of the handset spectrum, and has been widely touted as an acquisition target for a larger player like Motorola.
Samsung's contribution to the CTIA fashion parade was the Up-Stage, a thin candybar-sized device with a phone on one side and a music player on the other, packaged in a slim "battery wallet" that provides significantly extended battery life without recharging. However, it is not a full smartphone, since it does not have mobile email or full internet capability, nor an open operating system. It will be sold initially exclusively through Sprint for $149.
Conspicuous by its absence from the rollcall of new smartphones at CTIA was Nokia, which used February's 3GSM show in Barcelona, Spain, to debut its new models - possibly a public relations gaffe not to save a couple for the North American event, given the Finnish company's avowed determination to address its Achilles heel, weakness in the US.
It did, however, show off new models in its enterprise line-up, which currently represents its best hope of leading a sector in the US. It showed a pair of prototype devices including the new Communicator, which is the size of a large cellphone but unfolds into a mini-notebook computer for the "laptop experience on a mobile device".
The end game to which all these devices are geared was neatly summed up by the first keynote address in Orlando, from AT&T's chief operating officer Randall Stephenson, who proclaimed: "The golden age of information and entertainment is upon us. Let's remake the communications industry" - and in talking around this vision, gave an entirely free plug to a handset that was not launched at the show, but continues to cast a shadow even before hitting the market, the Apple iPhone.
Copyright © 2007, Wireless Watch
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