Mobile Solutions CI

MWC showing 2012 smartphone trends

MWC is in full flight and we are seeing all kinds of interesting news--Nokia's crazy camera phone (41MP, but Symbian!), HTC's brand launch for "one" devices, LG's quad core 3D device.

Here are the things I've been noticing from all the announcements:

Processors are becoming the new battleground. At first it was screens but now we see the core count and AP performance rising in prominence within the industry. The next six months will be make or break for NVDIA--can their Tegra deliver, can they support an on-time go to market? Their track record in tablets was not good and competing against Qualcomm means more than spyder tests. They have to show they can support partners in getting to commercial launch on time and bug free.

The biggest players no longer use these trade shows to drive news cycles. Samsung and Apple will have the most-watched, highest unit volume, heaviest advertised device launches this year and neither is talking about them at MWC. What is not there says volumes about Nokia and HTC efforts to leverage the event.

Screen definition technology is moving past the point of differentation for consumers. Just an opinion, but I don't see how anyone effectively markets around technology or size differentiation now that all players are pushing so hard. Huawei has two 4.5-inch screen devices, but still at resolution of 1280 by 720 pixel, while the LG Optimus 4X HD and the HTC One X both have 4.7-inch screens with a resolution of 1280 by 720 pixels. Blogs are reporting Samsung's new flagship at similar or better resolution.

Finally, everyone is anchoring on bringing best experiences in camera and music. For music I don't see how this wins against a full ecosystem experience such as iTunes (and no, Google music is not there yet). For camera, I have a hard time believing that will be a brand space you can defend beyond a product launch window.

It will be interesting to get a few months down the road and look back at Mobile World Congress and see what sticks.

Is the high end of US smartphone market saturated?

A WSJ blog entry has been surfacing across many links this week, citing Morgan Keegan analyst Tavis McCourt. He analyzed VZW and AT&T recent quarterly results and interpreted their flattening sales as indication of both iPhone hangover (consumers waiting to upgrade) and smartphone adoption in general slowing down.

The first point I can't speak to but still have doubt. Each quarter over time we've seen a steady rise in the percent of iPhone sales in the US which come from new, non-iPhone customers. iPhone is already well past RIM's peak of replacement sales (indicating market saturation for the current product) and hovers around 80%.

The second point is harder to pull apart. The argument that a slowing quarter in smartphone growth is attributable to the high end of customers already having smartphones may be true. However lower and mid-tier android adoption continues to accelerate. Wouldn't these consumers trade up over lifecycle to more advanced devices?

I wouldn't doubt that we will see a blockbuster Q4 for iPhone. However, I do doubt this signals a mass defection of android consumers ("We believe slowdown in Android/Blackberry/WP sales at AT&T/Verizon likely indicates a reasonable number of customers choosing not to upgrade in Q3, but rather waiting to switch to the iPhone in Q4.).

One culprit here may be a massive slowdown in RIM sales. We'll know in a bit if that is the case, and it wouldn't surprise me at all. Another would be Verizon's aggressive pricing. Most of their very limited SKU selection is above 149, several at 199, and even a couple at 299 all with full subsidy on 2YC. Verizon is shaping demand by only going after the most price insensitive customers.

The declaration that 45% smartphone penetration is a saturation threshold just doesn't sit with me. I agree that more carriers will experiment with pricing plans, but as much because hardware innovatoin is outpacing consumer need as anything. Not because we are at a ceiling--I think 85% is a more likely top end of smartphone adoption by 2012.

What do you think? Did sales slow because of pricing, iPhone hangover, or consumer saturation?

Amazon's tablet as indicator of Android fragmentation

The issue of what is fragementation on Android was a hot topic a year ago. Today the Android ecosystem is under such stress and strain that you really have to look at it from the broader perspective of a Linux platform to even see how quickly events are running past Google and the Android Open Source Project (AOSP).

Today's launch of the Kindle Fire, an Android-powered tablet from Amazon, is the latest example. Amazon is laying bare the fact that the most important elements of Android derive from its embedded linux foundation and not the UI or backing of Google.

Handset manufacturers will be forced to follow suit and begin building their smartphone brands more on content and pricing models.

Android chips away at Nokia and RIM from low end, Apple takes high end

Sponsored Content   

via www.rcrwireless.com

This article actually makes a contrary point to the headline. Look through the android devices named in the article as leading sales across US carriers and it shows Android splitting both high and low end. This seems to indicate the Android platform has been successful in its strategy of going across form factors and price points, even at the expense of fragmentation. The result will be that all the main players in the US mobile industry will continue to be heavily incented to work against helping developers consolidate the Android consumer experience.

Blogs | Wireless Week

Leap/Cricket, along with MetroPCS, often have been thought of as “bottom feeders,” as Bernstein Research analysts said in a research note released today,but they’re emerging as the new middle market. Nearly all of the industry’s subscriber growth is now coming from the prepaid segment. Prepaid and reseller net adds accounted for an all-time high of 91 percent of the industry’s total net additions in the first quarter, according to Bernstein. In fact, the analysts figure that excluding “connected devices” – laptop cards, MiFi devices and others – it’s likely that the postpaid industry actually lost traditional subscribers in Q1 for the first time ever.

 

At the very bottom, the low-end prepaid subscribers are trading down to USF-assisted SafeLink (TracFone) and Assurance Wireless (Sprint) plans for low-income people who qualify, Bernstein says. At the high end are AT&T and Verizon Wireless, with Sprint (postpaid) and T-Mobile USA getting caught in the middle.

via www.wirelessweek.com

Here is the US wireless industry in a nutshell...

When you look at the structure of the value added content service deal mentioned (Muve) in that context it signals a huge opportunity for someone who recognizes Apple's (and Google's) dependency on consumers basing their activity on a PC and using mobile devices secondarily. Increasingly the middle and bottom thirds of the US market look like EMEA and APAC regions where internet growth happens off PC.

iPhone 3GS at 99 Drives iPhone Share Growth

Though they’ve been surpassed in design and perfomance by their successors, Apple’s iPhone 3Gs and iPad 1 are still quite popular–so popular, in fact, that they outsell some of their newer Android rivals.

via digitaldaily.allthingsd.com

Here is a great recap of how pricing can create a portfolio just as product can. Apple has created a great spread of $100 between best/fastest and "good enough".

The (Somewhat) Sunny Side of the AT&T, T-Mobile Deal | Wireless Week

There's been a lot of griping about AT&T's $39 billion acquisition of T-Mobile USA, and for good reason. The deal will give AT&T and Verizon Wireless a near-duopoly hold on the U.S. wireless market; make it more difficult for smaller carriers – especially Sprint – to compete; and has raised fears that the merger may limit choice and raise prices for consumers.

via www.wirelessweek.com

This article points out that T-Mobile subscribers may fuel a resurgence of Cricket, Metro PCS, and smaller carriers. I think a more interesting possibility raised by this acquisition is the scenario of innovation outside of carriers accelerating.

More and more service and application --maybe handset?-- innovation will be forced outside of the traditional subsidy OEM + carrier approach.

That has brought us the iPhone and Android in the past three years. It is time for similar innovations to come from over-the-top services, and further constricting the potential for that at carriers may accelerate it overall in the market.

Reflecting on Verizon's iPhone launch

Watching the commentary on Verizon's iPhone launch announcement yesterday brought more questions than answers for me.

The iPhone appears to still be outselling Android about 2-1 amongst ATT and Verizon postpaid (contract) subscribers. Presumably this is a big reason Verizon pursued a deal with Apple which, in terms of customer impact, is the same as ATT's. No V-cast, no Verizon branding, no Verizon anything on the iPhone just the same Apple experience on a CDMA network.

Most analysts predict 9-15 million iPhone users for Verizon. Some of these are from Verizon's existing base, some range (10-20%?) of ATT iPhone users will bail in the hopes of fewer dropped calls and higher bandwidth, and some percent of customers new to Verizon entirely who come for the iPhone.

The iPhone is widely reported to cost carriers close to $700. It retails for about that amount if you buy it off contract (yes, some people do--I have twice, once with the first iPhone then again a year ago for a 3GS).

If you figure VZW spends $350-400 to pay down the cost of an iPhone to $199 (299 for 32GB) with contract, then you get $3-5 billion in subsidy which Verizon must pay before even spending a dime on promotion.

Was VZW already spending close to that amount in subsidy for Droid devices? I suspect they were indeed in that ballpark. Does the iPhone look more attractive for churn and OPEX reasons compared to Android devices over a two year period? If so does that underpin the business model which says it made sense for VZW? Or did VZW do this for "strategic" reasons?

My guess without knowing is that the iPhone is $50-$100 more expensive than the highest end Android devices from MOT and HTC, but that up-front subsidy cost is outweighed by greater profitability across three other variables:

• iPhone requires little marketing or other promotion from VZW to drive sales. They can market to attract brand affinity if they think they need it--and god knows VZW needs any "coolness" they can grab--but they don't have to spend much or anything to get customers aware that they have an iPhone. VZW regularly spends hundreds of millions to tell customers and potential customers that they have a Droid so promotion requirement effectively makes those devices more expensive
• iPhone is cheaper to run. iPhone has fewer care calls, lower data rates, and exchange returns.
  • ATT has said that 90% of iPhone users consume 250MB or less of data per month. This is substantially less than typical Android devices. The app model and use of iTunes (and wifi) for heavy duty syncing make the iPhone cheaper to have on network. The heavy browser use of Android devices, driven by poorer app experiences and the differing preferences of Android customers, combined with the horrendous sync protocol management built in to Android makes Android devices twice as expensive to have on network (note--I made up "twice as expensive" to make a point).
  • Apple's retail stores, Genius bars, and well-maintained forums bear the brunt of care cost. Not so for Android devices.
  • Apple customers tend to forgive their devices of more, use them less expansively, and do not expect the carrier to fix them when they root them. An astonishing amount of Android customers modify their devices in ways which hamper or destroy their ability to perform on a particular network and then return those phones to the carrier as defective. This dynamic is far, far less on Apple which is not considered an "open" platform.

So did VZW model through these questions and decide it was more cost effective to subsidize devices up front in stead of marketing and supporting them on the back end? Or did they just get tired of being asked when they would have an iPhone?

CES 2011 starts early with processor, tablet, android news

CES this year is making me reflect upon the evolution of the event over the past few years. As the recession has turned into the new now the event has become more and more of a hype fest. It started out as a consumer-focused trade show for electronics vendors. It has turned into a technology fetish event which is a perfect parallel world to the other big trade show which happens, non-accidentally, also during this week.

The LTE and WiMAX announcements are rolling out today. Once the show gets going there will be a tablet launch every hour to keep track of time. 3D announcement will mark the half-hours.

Another announcement thread catching my eye is from the chipset vendors. Freescale has a release out this morning saying they have commercial-ready quad core available: "The dual-core and quad-core versions of i.MX6 also include three separate graphics cores - a 3D and 2D core and a bit-blip engine to offload the 3D graphics core for gaming. They can both handle simultaneous playback and recording of 1080p stereoscopic 3D video, and complex augmented reality apps, which can dedicate one core to location calculations, one to processing live video and a third to overlaying the tactical information on the live video feed". 

Wow. Get ready for more sloppy programming as OEMs race to take advantage of the spec war. I've yet to see the manufacturer taking the time to get good--or even better than the crowd at xda developers--at making wise choices on optimizing read/write blocks, write software for multi-threading/multi-core, etc. Raw computing needs, mostly encoding and rendering, will be the only aspects to really benefit but overall performance as perceived by consumers will as likely suffer as benefit. 

Each of the main topic areas of CES make me think this is not the consumer electronics show, it is the vendors electronics show where a huge echo chamber attempts to generate enough frantic energy to convince actual consumers they want products which have no meaningful benefit to them.

Not sure how this post turned so cranky. I guess I should go back home and have some excellent coffee until my optimism returns.

MOT, HTC replace RIM at VZW -- for now

BGR has a post showing RIM's plummet from dominating smartphone share at VZW in 2009. They have been replaced by Android models from MOT, HTC, and Samsung. While this is bad news for RIM it also indicates the Android vendors better have a plan in place for Q1 when VZW pivots its promotion to iPhone. At that point the Android OEMs will see their own negative hockey sticks.