The mobile phone market continues to be one of the most exciting in the telecom industry. New entrants in the market, increased emphasis on services and continued growth in emerging markets will make for another exciting and highly competitive year.
Who are the Key Players and Who Will Fall Victim to Consolidation in the Mobile Phone Market?
In 2007, the mobile phone market reached 1.2 billion units sold to end users. The market developed interesting new dynamics as new players such as Apple entered the market and as established players such as Nokia looked at alternative business models to complement their phone business. This market competitiveness was underlined by the second largest phone manufacturer, Motorola.
Nokia’s long-term target of 40% market share was achieved in 4Q07 when it sold slightly more than 133 million phones across the world. In 2008, Nokia will need to continue to improve its portfolio.
Samsung took second place in the ranking in 3Q07 and 4Q07 thanks to success of the Ultra II family of products and a more aggressive price strategy in the midtier.
When looking outside the top five players, it is interesting to see how the market changed in 2007. On the one hand, we have aggressive pricing and a focus on emerging markets (ZTE), and on the other, targeted functions (RIM) and brand and design (Apple). In 2007, we saw the impact of consolidation with Acer acquiring E-Ten. Sanyo and Kyocera also joined forces while Mitsubishi exited the market all together.
Which Technologies Will Drive Sales in the Next Three to Five Years?
Changes in user interface models and software design will be driven by a deeper understanding of what the user is trying to do: whether it is adding a friend to an address book, automatically noting the location where a photo is taken, capturing and uploading a video to a blog, listening to music, or browsing through an online catalog. Technologies such as touch interfaces, accelerometers, haptics, virtual keypads and surround sound will be incorporated into devices — not merely to appeal to the technologist, but to become an essential part of the user experience for all users.
In 2008 we will witness the transition from 3G to 3.5G in the cellular world while alternative technologies such as WiMAX and Wi-Fi continue to be talked about as a possible alternative. Other interesting developments are to be expected around user interfaces as mobile phone. Features such as cameras and digital music will improve over the year as prices lower, pushing these two features more and more toward mass market consumption.
As Smartphone Volumes Grow, Which Platform Will Be the Winning One?
In the next five years we expect Symbian to continue to dominate — a clear indication that the smartphone market remains dominated by models targeted mainly at the needs of consumers. More corporate-grade smartphones have nevertheless recently emerged. These devices are recognized as viable business tools and respond to the growing mobility needs of the workforce. This trend will help the global smartphone share of the Microsoft OS in particular to expand further from 2009. Over the last year, Mobile Linux has received a lot of interest although its progress has so far remained limited to Asia with Motorola, and Japan with Panasonic and NEC. The fragmentation of standards, lack of a consistent Linux platform and diversity of objectives of the main industry efforts around Linux, are limiting Linux phones from going mainstream and penetrating other geographies beyond Asia. The recently announced Android platform and the stature of Google and the Open Handset Alliance (OHA) members give a significant endorsement to Linux. The Android platform will be a significant catalyst in the North American market, as a low-cost consumer OS has been missing from this region and Symbian's presence is not significant.
What Role Does Brand Play in Consumer Choice?
Mobile phone manufacturers have partnered with key brands to raise visibility of a particular product or even increase their own brand status. Examples are Motorola and Dolce & Gabbana, LG and Prada, Samsung and Armani, and Sony Ericsson and Fossil. Other consumer brands such as Levi’s have entered the market with limited edition phones.
But brand is not only about designer and consumer players. Mobile phone operators have been increasing the number of phones that they bring to market under their own brand. This is for two main reasons. First of all, operators believe that phone manufacturers add a premium on their device costs because of their brand. Such a premium in emerging markets can make the difference between affordable and unaffordable. The second reason is that carrier-branded devices help operators to "own" the customer. In our end user studies, mobile operator-branded phones have been growing as a percentage of overall sales.
How Are Mobile Phone Manufacturers Responding to Price Pressure and Increased Competition?
Moving into the services space has different challenges for mobile phone manufacturers. First and foremost, such a move might be seen as too aggressive by mobile phone operators who might believe they have the sole right to offer services to consumers.
T-Mobile’s decision in Germany not to range Nokia products that are supporting Ovi is a clear sign of this attitude. By contrast Vodafone, TIM and Telefonica have announced support for Ovi on their terms.
The change in "ecosystem" is epitomized by Nokia with Ovi, Sony Ericsson with PlayNow and Apple, with its iTunes store which has defined the benchmark by which current ecosystems are to be measured, even though it currently only accessible via Wi-Fi.
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