Mapping the mobile ecosystem: top-20 most connected companies

Back in March we released the 3rd edition of the Mobile Industry Atlas, the definitive who’s who of the mobile industry. Since its humble beginnings in 2008, the Atlas has grown to more than 1,100 companies across 69 industry sectors; including all key companies, from 20:20mobile to ZTE, and market sectors, from Active Idle Screen solutions to Service Delivery Platforms.

To distill market noise into market sense, we have broken down the entire mobile ecosystem into four main categories:the core value chain, the suppliers to network operators, the suppliers to handset manufacturers and finally the services that run on top.

Top-20 most connected companies in mobile
We run some stats on our Atlas database and came up with an interesting analysis on the most ‘connected’ companies in mobile, i.e. the companies who have fingers (products) in most pies (market sectors).

At the top of the list are Nokia, Google, Microsoft and Qualcomm, which represent heavyweights from manufacturing, services, software and IP backgrounds respectively. Nokia appears in 17 market sectors including, the OS and Browser sectors, Developer Tools, Mobile Search, Barcode Services and Connected Addressbook sectors, to name a few.

It’s also instructive to analyse which market sectors are most frequently encountered within these top-20 companies: it’s operating systems, browsers, application stores, as well as content management & delivery infrastructure. These sectors are either building blocks as part of a more integrated offering (as in the case of operating systems or browsers), or high growth opportunities (as in the case of app stores).

How does this help me?
The main function of the Atlas is to provide a clear view of the key players operating in each sector of the mobile ecosystem. For example, the Handset Manufacturer Supply Chain can give you an idea of the leading companies operating in this part of the ecosystem, from chipset manufacturers and RF component manufacturers all the way to operating systems and browsers. It’s all in there, from the much-hyped Android platform to the more obscure plastics manufacturers and vendors of input technologies. Most of the Atlas is being a paywall, but you can see a sample here.

Under-the-radar sectors
We ‘ve showcased several under-the-radar sectors into the Atlas, including Application Analytics, Campaign Analytics and Service Analytics. These three sectors comprise the leading providers of usage and marketing analytics tools to developers and mobile web (or WAP) sites, as well as platforms for mining network or service data to extract service intelligence. Naturally, you ‘ll also find your typical hyped sectors like Mobile Ad Networks & Mediation Engines, as well as Mobile Advertising Platforms and Agencies. The Connected Addressbook sector is yet another category that has attracted a lot of media attention and is part of our Atlas.

The complete list of market sectors in the Atlas is below, broken down into the four main categories:

Network operator supply chain Handset manufacturer supply chain
– Billing platforms
– Call completion, voice messaging & voicemail
– Content Management & Delivery
– Content retailing and billing mediation
– Core network and radio infrastructure
– Customer support services
– Deep Packet Inspection
– Mobile media publishing platforms
– Service Analytics
– Service delivery platforms & Network APIs
– SMS/MMS gateways & aggregators
– Traffic & content optimisation
– Application environments
– Audio middleware
– Baseband and application processors
– Browsers
– Camera technology and subsystems
– Imaging and video middleware
– Input technology
– Multimedia chipsets
– Non-cellular connectivity components
– Operating systems
– Plastics & mechanics
– RF components
– Silicon
– UI frameworks
Core value chain Content and services
– Industrial design
– User interface design
– Reference hardware designs
– System integrators
– ODMs and contract manufacturers
– Handset OEMs
– Luxury handset OEMs
– Mobile network operators
– SIM card OEMs
– SIM application vendors & services
– Distributors
– Retailers
– Active Idle Screen solutions
– Application Analytics
– Barcode Services
– Campaign Analytics
– Connected Address book
– Content backup & synchronisation
– Developer tools
– Device capabilities databases
– E-mail synchronization
– Enterprise mobility
– Games publishers
– IVR Platforms
– Mobile Ad Networks & Mediation Engines
– Mobile Advertising Platforms & Agencies
– Mobile banking and payments
– Mobile content publishers
– Mobile Device Management
– Mobile instant messaging and chat
– Mobile search
– Mobile social networking
– Mobile VoIP
– Navigation, Mapping and Location platforms
– On-Device Portal solutions
– Recommendation services
– Security solutions
– Software integration services
– White-label Application Stores
– Widget Platforms

The Mobile Industry Atlas is available in A1+ wallchart format or PDF, for carrying around in your iPad or sharing with colleagues.
What do you think of the Atlas and what would you like to see next?

– Matos

Mobile Virtualization – Coming to a Smartphone Near You

[mobile virtualisation is an underhyped yet far-reaching technology. Guest author Steve Subar looks at virtualisation and how the technology will be elemental in enabling mass-market smartphones]

Imagine one phone with two personalities – one to fit your personal life, the other for business.  Instead of carrying around two or more devices, you’d be able to access multiple virtual phones on a single handset.

This article introduces mobile virtualization and the range of its use cases, with implications that span from silicon to smartphones to shrink-wrapped software to operator services.  It also expands upon two key applications: building mass-market smartphones, and enabling secure mobile services.

What is Mobile Virtualization?
Virtualization is new to mobile, but established in the data center, fundamental in cloud computing and increasingly popular on the desktop.

Mobile Virtualization lets handset OEMs, operators/carriers and end-users get more out of mobile hardware.  It decouples mobile OSes and applications from the hardware they run on, enabling secure applications and services on less expensive devices today and deployment on advanced hardware tomorrow.

Virtualization provides a secure, isolated environment for operating systems that is indistinguishable from “bare” hardware. This environment is called a virtual machine (VM), and acts as a container for guest software. A software layer called a hypervisor provides the virtual machine environment and manages virtual machine resources.

Resources and performance of mobile devices differ markedly from data center blades and desktops. So do business requirements. Mobile virtualization is different from virtualization used in enterprise and personal computing in several ways:
Hardware Support: mobile virtualization focuses on silicon deployed in mobile handsets, primarily ARM architecture CPUs.  By contrast, most enterprise and desktop-hosted virtualization targets versions of the Intel Architecture.  Moreover, Intel and AMD augment server and desktop CPUs with virtualization support functions, in contrast to silicon in phones that does not (yet) include these capabilities
Guest Software: Data center and Cloud virtualization usually hosts multiple instances of a single guest OS:  thousands of Windows or Linux VMs.  Desktop-hosted virtualization usually invokes just one.  Mobile virtualization involves running multiple, diverse guest platforms: applications OSes (Android, Linux or Symbian), low-level RTOSes for baseband processing and other system chores, and also lightweight environments for specialized processing (shared device drivers, security code, etc.).
Performance: enterprise virtualization strives for maximum throughput for guest software loads.  Mobile virtualization must also enable real-time response for latency-sensitive baseband and multimedia processing on resource-constrained mobile silicon.
Suppliers: enterprise virtualization is dominated by offerings from VMware, Microsoft, IBM and Citrix and supported by open source projects like Xen and KVM.  VMware and Parallels supply the desktop-hosted market.  While several vendors field embedded virtualization technology (Wind River, Greenhills) only a few focus on mobile virtualization – VirtualLogix, Trango (now part of VMware) and Open Kernel Labs.

Use Cases
Mobile virtualization is a flexible technology with a range of use cases:
– BYOD: lets you Bring Your Own Device to work, and switch among multiple virtualized environments, isolating personal and corporate applications and data.
– Chipset Consolidation: merging multiple CPUs into a single processor running application and baseband stacks, to reduce BOM costs and simplify design. Lower BOM costs could enable a new wave of mass-market smartphones, shipping in greater numbers and driving growth in data traffic and ARPUs.
– Legacy Software Support: in a new handset design, running unmodified, previous-generation software (e.g., a pre-certified baseband stack) in its own virtual machine
– Security: using multiple VMs to isolate software stacks from one another, e.g., securing mobile payments or protecting programs used to access business-critical enterprise assets from untrusted open OSes and software
– Multicore Support: managing available processor cores and mapping physical CPU resources onto “virtual CPUs” running actual software loads
– Energy Management: shutting down CPU cores when they are not needed and migrating running guests to remaining core(s)
– MNO Branded Services – using secured VMs to host operator-branded services
– Mobile-to-Enterprise Virtualization (M2E): – using secured VMs to host enterprise applications and provide access to business-critical corporate assets, e.g., hosting the Citrix Connector to access a virtual enterprise desktop
– Rapid Deployment: let OEMs and operators/carriers launch new versions of existing devices and rollout new services offerings on existing mobile hardware

Most mobile OEMs and operators/carriers look to mobile virtualization to address a combination of use cases.  Let’s examine two of particular interest:  mass-market smartphones and secure services:

Mass-Market Smartphones
Smartphones increasingly drive the global mobile ecosystem. According to Gartner, total mobile phone shipments in 2009 surpassed 1.2 billion, of which 172.4 million units were smartphones, an uptick of 23.8% over 2008.

Smartphones are critical to the fortunes of mobile OEMS, MNOs, chipset suppliers, and providers of applications and services – they drive data traffic, improve hardware margins, expand silicon design-wins, and drive software sales through app stores to increase post-load revenues.  However, broader adoption of smartphones has been slowed by retail pricing of smart handsets and cost of accompanying data plans.

A mass-market smartphone offers smartphone capabilities at a feature-phone price point. To deliver such a high-functioning yet low-cost device, OEMs must deploy a full-featured open OS and applications on more modest mobile hardware.

Current smartphones utilize high-end chipsets with dedicated CPUs for application and baseband processing. This approach contrasts with featurephones, where both stacks run on a single CPU and simpler embedded OS (Real-time operating system – RTOS).

Virtualization enables OEMs to build smartphones with less expensive single-core chipsets (see figure).  Such chipsets can also enable using lower-cost components for other functions (display, battery, etc.) not compatible with high-end mobile silicon.

The mass-market smartphone is more than just a concept touted by visionaries. Real devices have been delivered, such the Motorola Evoke QA4, with more to come.

Secure Services
Mobile virtualization also facilitates a range secure services, enabling enterprise-grade security on standard handsets. Virtualization can help secure mobile platforms, applications, and services by keeping trusted software to a bare minimum – the hypervisor itself and carefully chosen additional components – and then isolating them from threats arising from vulnerabilities and faults existing in today’s complex software stacks.
Virtual machines, containing a bare minimum of essential software, can be dedicated to secure services. A single phone could contain a virtual machine optimized for execution of secure services, deployed side-by-side with other mobile software, with practically no incremental BOM costs.

Secure service examples include:
– Isolating software for mobile payments and banking
– Hosting secure access to private medical records
– Providing a platform for secure access to business-critical corporate data (as in BYOD and M2E above)
– Enabling secure voice calling by isolating VoIP stacks from open OSes

Building mass-market smartphones and deploying secure services with virtualization are complementary use cases and emphasize doing more with less:  virtualization enables deployment of smartphone capabilities on lower-cost hardware; it also makes possible the introduction of new secure services on currently-available mobile devices.

Overcoming Challenges to Adoption
As illustrated above, mobile virtualization offers a flexible solution to many design and deployment issues for devices and services on them.  Despite its many use cases and successful deployment in products shipping in volume, mobile virtualization faces systemic challenges to even broader use:
– Perception of the technology as a viable alternative to legacy solutions, e.g,. a software solution to delivering lower BOM costs or to providing security
– Concerns about performance overhead
– The need to integrate mobile hypervisor as pre-load software, on a per-device basis (as opposed to post-load, application-style deployment)

These challenges are gradually being overcome;  mobile OEMs and operators/carriers are increasingly attracted to the use of virtualization to bring down the cost of Android devices, while recent performance benchmarks at key OEMs have tempered concerns about the performance overheads.

Mobile virtualization has been shipping in mobile phones since 2009. Despite challenges to adoption, the mobile/wireless ecosystem is turning its attention to this flexible technology, especially to bring down the cost of building and buying smartphones.  Coupled with emerging needs to provide secure services on mobile devices, mobile virtualization should play a key role in the deployment of the next 500 million phones.

– Steve

[Steve Subar is the President and CEO of Open Kernel Labs, a mobile virtualization firm]

The past, present and future of Mobile Video Telephony

[Apple has been trumpeting their ‘new’ iPhone 4 FaceTime service, but where’s the novelty? Mobile video telephony has been around for at least 8 years now. Guest author Tsahi Levent-Levi reviews the state of the mobile video telephony market, the barriers to its adoption and what the next 8 years hold]
The article is also available in Chinese.

Mobile video telephony has already been in the market for over 8 years, in most 3G phones, but have you ever used it? Do you even know if your phone supports it? If your phone has a front facing camera, chances are it supports mobile video telephony. And if you live in Europe and Asia, chances are you have a front facing camera.

With millions of users around the world equipped with mobile handsets capable of video calling, we should have seen more wide use of this technology. Why hasn’t this happened and where exactly is this industry going?

The 8-year history of mobile video telephony
Mobile video telephony started almost a decade ago. Sometime during 2002 I also joined the effort. It started by taking the consumer ISDN video telephony solution (that didn’t catch up), based on an ITU-T standard called H.324, repurposing it for mobile handsets and renaming it 3G-324M for no apparent reason. At that time, three organizations were involved: the ITU-T, the 3GPP (which focused on standardization) and the IMTC (dealing with interoperability between devices).

In 2002, the companies involved with interoperability were Ericsson, Dilithium Networks, Packet Video, Radvision, Sharp, and Siemens. What handsets were on the market? There was one from Sharp and a couple of others from the Japanese market, only available in Japan. By 2004 there were 14, including Motorola, Nokia, Qualcomm Samsung and Vodafone. It took about 4 years until you could safely say that each handset could connect to another and get bidirectional video.

Throughout the years, the main stakeholders of the standardization and interoperability were the vendors providing the protocol stack implementations such as Radvision and some select handset and chipset vendors – namely Qualcomm, Nokia and Ericsson.  The rest took a more passive approach, either by making sure that their handsets interoperate or by relying on others to provide those capabilities. When it came to certification and validation of the handsets, the main stakeholders were usually the service providers themselves.

Mobile video telephony today
Fast forward to today, and you will notice a few important improvements to the initial standards:

  • 3G-324M (a 3GPP specification), along with a GCF validation process, ensures that any handset coming to the market with video telephony can interoperate with any other handset out there. Putting the GCF test cases in place was a process of over a year, discussing the various tests that should be included and the creation of the ecosystem around it – mainly test labs and testing tools.
  • Operators have mandated the inclusion of 3G-324M support in all 3G handsets that they sell to their customer base. Or at least that was the case up until the iPhone came along.
  • Roaming agreements between operators in Europe and Asia have been put in place so that you can now dial an international mobile video call to others. With a few exceptions (dialing from Israel to Japan, for example) this service works flawlessly.
  • Call setup time has reduced from 7-15 seconds to below 1 second using additions to the standard. This was pointed as a barrier for consumer acceptance of the service, and operators have worked to successfully remove the barrier.

These days, standardization and interoperability efforts on mobile video telephony are limited. For the past 2 years it has been quiet in both fronts. The main reason? The standards have matured and interoperability is usually a solved problem. But still – consumer adoption is lacking.

So what went wrong? We’ve got enough phones supporting video telephony, interoperability is as seamless as in voice calls, and connection times are shorter. Where’s the usage we’re all waiting for?

Well, have you ever made a video call? Or received one? As someone who developed and then licensed 3G-324M technology to other vendors I did my share of video calls. Most of them work related. Very few were personal.

The sticking points of mobile video telephony adoption
Operators have been trying for years to get people on board their mobile telephony solutions, alas with little or no success. Several reasons have been offered to explain the lack of adoption. Yet none of these stand up to scrutiny.

  • Pricing: some argued that the high prices of video calls (60 cents a minute in some countries but the same as normal voice calls in others) is the reason why people don’t use it. I think it is irrelevant, especially when people don’t really know how much they pay for the service. People didn’t use it a lot even when operators provided it at the cost of regular voice calls, and at the same time people are using the SMS service which usually has ridiculously high pricing.
  • Video is unnatural: people like to see others but don’t like to be seen. Great, but how do you deal with the fact that for Skype, 36% of Skype to Skype calls are video calls? It can only mean that with the right implementation, people are quite happy to adopt video calling.
  • The missing video button. People take huge amounts of images on their iPhones without having a dedicated camera button. Most use SMS all the time – teenagers use it as their primary method of connection with their friends, and there’s no SMS button either. On most handsets, doing a video call requires the same effort as sending an SMS (minus the typing the message part). While it would be nice to have a video button for video calling, it probably isn’t the reason why people don’t use it.

While the reasons above have some truth in them, I think they are limited in their importance. There are other, more crucial barriers of adoption:

  • Video Quality:  mobile video telephony today uses very little bandwidth. 64 kilobits per second. Compare it to a high definition video channel of 2-4 megabits per second and you have a truly low grade video in hand. While handsets had low resolution displays that was just fine, but today, when VGA is the norm and higher resolutions are coming to smartphones, there will be need for more bandwidth. Once more bandwidth is available, there will need to be better processors capable of compressing video – but that’s just a matter of time according to Moore’s Law.
  • Coverage: in most countries, 3G coverage is partial, i.e. doesn’t cover the entire population covered by 2G. It means that if you want to call someone using video, you need to know where he/she is – your call might fail simply because the other party has no 3G coverage.
  • Usability: when you interact with a mobile device today, you don’t hold it at head height – you hold it a lot lower than that. Video telephony requires holding the phone higher. It is for the same reason I surmised that the iPad won’t have a front facing camera – mobile devices don’t provide the experience you get by having a video call in a conference room or from your laptop. Camera positioning is key here: on mobile handsets, the front facing camera forces the user to hold his hand in front of his face in an uncomfortable position – especially taking into consideration that today’s video calls are usually long ones. Add to that the fact that you need to deal with the phone’s speakers or connect a headset, add the noisy surroundings, and you have a recipe for bad experience.

Once the iPhone came along, operators changed their focus. From trying to get video telephony to be adopted and finding additional multimedia services, they went to putting their hands on shiny smartphones with touch capabilities. Apple has changed the attitude from “killer application” to the long tail of an application store. And now that the slew of Android devices are expected to come out, the resurgence of mobile video telephony requirements from handset vendors is being seen.

While bandwidth and processing power will be solved naturally with faster, better and more efficient processors and networks, usability requires real innovation. It makes it the most critical component of all. The one to solve this problem will open up the mobile video telephony market for the masses.

Where is mobile video telephony used?
While we have no real mass adoption of mobile video telephony, there have been some notable trials that have been going on for the past several years around the world.

The concept of mobile video telephony as a killer application was a wrong one, but the use of it as a building block by various applications can be found:

  • Video Mail: video mail support has been deployed by multiple operators worldwide. It allows people to leave video messages from one to another and retrieve them later. In the same way that voice mail services suffered from the rise of SMS, so does video mail, which was already disadvantaged by the limited use of video calling services.
  • Mobile TV and video on demand (VOD): while there are other options for mobile TV, mobile video telephony provides a solution that is standardized and available across most handsets on the market. Where mobile TV is fragmented between standards, video telephony can come to play. In Israel, for example, you can hook up to news channels from the phone in this way.
  • Entertainment TV: Mobile TV is nice, but adding interactivity was thought to be a killer application, especially for sports programs and reality shows. Trials of connecting video calling with sporting events and big brother have been done, but none have caught up.
  • PC-to-mobile: video calling over the desktop is used a lot more than over 3G. That being the case, the ability to bridge the two has been tried by a number of operators around the world.
  • Banking: banks have warmed up to video communications. They use it to enable access to specialists in remote branches or to allow people to contact a bank clerk remotely. They offer some of these services from mobile handsets as well – using mobile video telephony. Another interesting use of video communication in banking is accessing ATM services through video calling instead of voice calling.
  • Visual call centers: this is an easy one. Wherever there is a voice call center, a video one that allows mobile phones to call by video makes sense.
  • Healthcare: Mobile video telephony is used today around the world by doctors to communicate between peers and consult with specialists. An example of such a use is an Israeli hospital where doctors use mobile phones during their daily rounds and surgery procedures.
  • Hard of Hearing (VRS): Video Relay Services enable deaf and hard of hearing people to communicate with the world by way of a mediator who communicates with them through the use of sign language using video communications. The ability to do that on the go adds an important mobility aspect to the service.

What becomes apparent from these use cases is that video is not used as a bidirectional conversation, but rather as a one-way real-time video communication for the consumer who wants to see the person they are talking to.

The healthcare example really is a key one here. Mobile video telephony is used today and can be used even more when expert advice is needed from people who are on the go. It is where this system excels.

What’s next?
We do have mobile video telephony, with all of its benefits and faults. But where are we going with it? The next step will be a migration of the service from circuit switching to packet switching – to become all-IP. This will require two major changes:

  1. Migration from WCDMA/HSPA to LTE, where an all-IP network will be the norm and network capacities and bandwidths allocated for each phone will increase.
  2. Replacement of 3G-324M with a different standard that runs over an IP network. Probably as part of IMS (IP Muiltimedia Subsystem).

While Apple just came out with their front facing camera and FaceTime service on the iPhone, it is still quite limited: it runs over WiFi, only between iPhone 4 devices and uses a protocol that Apple plans to open. For mobile video telephony to become a valid solution it needs to use an open standard, run everywhere and be interoperable across devices.

When will that happen? At the very least 8 years from now it will require the creation of the necessary ecosystem of companies who care. The problem is that these companies are currently focused on providing the basics of the LTE infrastructure. This requires them to rethink their voice and SMS technologies in initiatives such as VoLTE (Voice over LTE). Once they will have the attention span to deal with mobile video telephony over IP networks, they will have a lot of work to do. Standardization takes time and patience.

The winner though won’t be the one who brings better bandwidth or improved video quality to his mobile device. It will be the one who will solve the usability issue. Why? Because it is the hardest of the problems, and it is the toughest problem to solve. Bandwidth and processing power will be solved for all competitors – solving usability will be an innovation that can provide real added value. The moment that happens, you can be sure that mass adoption of mobile video telephony will become a reality.

– Tsahi

[Tsahi Levent-Levi is Director of Technology and Solution at Radvision. He has been involved with the mobile video telephony market for 8 years, dealing with design, development, standardization, interoperability and marketing of such technologies. You can follow his personal blog at]

Lead, innovate or assemble: three choices for handset OEMs as mobile starts to look like the PC industry

[Android has triggered more changes to the mobile industry than anyone had imagined. Research Director, Andreas Constantinou looks at the profound changes taking place and how the handset OEM market is shaping up].

Mobile industry connoisseurs used to smirk at the notion that the mobile industry was any similar to the PC world. How can the two industries be any similar when the software, services, channels to market, operator control, regional economics, and range of experiences were all so different.

This is so last decade. The march of software has irreversibly changed the economics of value in the mobile industry. Google’s Android and Apple’s iPhone have caused disruptions that threw all analyst predictions off the chart. Industry pundits used to project a linear growth for ‘open’ operating systems (Symbian, Windows Mobile et al) that saw them take over an increasingly large share of mobile handsets sold.

But the evolution of software has been anything but linear in the last two years; Google’s Android, an operating system that was greeted with skepticism in 2008 become a launchpad for just about everyone working within the mobile industry.

Network operators/carriers saw Android as an opportunity to reduce their dependency on two players, Apple and RIM whose stellar sales were depriving operators from any negotiating power. Operators have always tried to divide and conquer amongst their suppliers, for example working in 2002 with HTC and Windows Mobile to reduce their dependency on Nokia, or in 2007 using a three-pronged OS strategy (WinMo, Symbian, Linux) to reduce their dependency on Microsoft. Android allows operators to deliver iPhone or BlackBerry –like devices at much higher levels of customisation and at much lower subsidies.

Handset OEMs saw in Android the opportunity to develop iPhone clones at less-than-iPhone prices for operator customers. In 2008-9 most Android projects were kicked off by operators, while in 2010 OEMs are investing in Android big-time. LG and Samsung, who used legacy real-time OSes for 90% of their high-end phones in 2009 have now 10s of Android projects in the pipeline for 2010-11.

Software developers saw the opportunity to enter the mobile ecosystem of downloadable apps – in the role model set by Apple’s App Store – in the most approachable and developer-friendly platform ever created for mobile.

But the biggest changes are yet to appear.

Android has triggered a mass arrival of 10s of ODMs from China and Taiwan eager to create me-too touch-screen handsets. Qualcomm and Mediatek, the chipset vendors powering the majority of feature phones today have launched or preparing to introduce out-of-the-box Android designs that reduce the time to market for Android handsets to 6-9 months (or circa 3 months once Mediatek’s design hits the market). Platform development for Android has dropped to the $300 per engineer-day mark, while big outsourced development centers are being set up in Asia dedicated to Android handset development. All these developments will allow Android touch-screen handsets to hit the €150 mark retail price.

The new world order: Lead, innovate or assemble.
The developments triggered by Android have made it possible to replicate the economics of the PC industry, leaving mobile industry insiders dumbfounded. Last decade’s rules and role models no longer apply. Instead there are three role models emerging for handset manufacturers in the world of commoditised software: leaders, innovators and assemblers.

Assemblers. Dozens of contract manufacturers can now take Android and deliver fully-featured, high-end handsets at made-to-measure requirements, but at price points and wow-factors only enjoyed previously by top-5 manufacturers. Think iPhone me-too experience at €150 retail price.

Innovators. The price pressure from assemblers will force the top-5 OEMs to innovate-or-die. With the innovation moving out of the pure user interface domain, widgets or touch innovations or no longer the ‘wow’ factor. To claim higher prices at €300 (and a respectable margin above the BOM) the top-10 OEMs will have to innovate.

Handset innovation lies in three elements: firstly, novel industrial design (think Nokia’s ‘listick’ or sports handsets of 2006) that will break the boring mould of today’s form factors and plastics. Secondly, novel use of sensors that will enable user interactions only imagined so far. Thirdly, use of shelf space within the commonly used applications (idle screen, menus, browser chrome, app store) to promote and monetise from third party content. Yet innovation will have to be balanced with application compatibility. Already we ‘ve seen how Android implementations have created fragmentation headaches for developers.

Leaders. To reach the top-tier of handset pricing (circa €500) handset manufacturers have to deliver new product experiences. This is the privilege enjoyed by Apple, RIM (and Amazon Kindle to an extent) who have integrated hardware, software and services under the same roof. You can buy Mediatek-powered iPhone clones in China (Shanzai in local speak) for $75, but the experience is laughable to an iPhone user. Only by controlling and integrating hardware, software and services under the same roof can a manufacturer deliver new product experiences that can command top-tier retail prices.

Mass producers. Naturally, emerging markets where retail prices are at circa €50 make up the majority of the mobile handset market – at least revenue wise. And while assemblers can produce low-cost devices, they won’t have the economies of scale to make a profit at €50 retail price. Mass producers, i.e. companies with the supply chain sophistication and negotiating power of Nokia and Mediatek can do that.

The picture that emerges for the mobile handset market in 2015 (the predictable future) is surprising in many ways. We estimate that the top 5% of the market will command as much revenue as the bottom 50%, but with a higher profit – for example Apple and RIM today bring in around 55% of the industry’s profits. The middle two segments (what some observers call mass-market smartphones) will generate much higher revenues.

The mobile industry is starting to look scarily close to the PC industry, both in terms of business models and profit vs revenue patterns.

What do readers think? Is the PC future for mobile inescapable?

– Andreas
you should follow me on twitter: @andreascon