Mobile phone industry shifts

The mobile phone industry is going through a shift – with consolidations and the recent news that Nokia is having issues with management and profits. We asked our Zintro experts what they think is behind the shift and how the industry might be changing.

CKraft, a user experience designer, expert, and inventor, agrees that the mobile phone industry is going through a shift, or rather the shift has already taken place. “Looking back ten years, innovation in mobile phones was primarily on features, design, and to some extent, basic services like ringtone download. Just few years ago, companies that could provide a design, form factor, and feature set won the market,” explains Kraft.

Kraft says that Nokia was the market leader, and still has extremely good insights into the target market, but that Apple’s entrance into the mobile phone market was a game changer.

“Apple had a successful eco-system built for music with the  iPod, which they then leveraged into other business areas,” says Kraft. “The mobile phone business was an obvious choice, even though Nokia was controlling the market with 40-60 percent market share in many countries. But, Nokia never managed to build-up a good platform or content for the service business industry.” Kraft says the reason’s for Nokia’s troubles are related to old software platforms in the devices and the thinking that “more devices on the market, the better.”

“The profit in the mobile phone industry is no longer coming from selling handsets but from selling services like applications and content (music, videos),” says Kraft. “Nokia, compared to major players like Apple and Google, has almost no profit in this area. At the same time, Nokia realizes how the profit of handsets is reducing dangerously every year.”

Kraft says the future of the industry may map closely to what happened in the PC and the music player industry: the hardware manufacturers will become niche, and the profitable industries will provide services, content, and software to the devices.

Mats Samuelsson, a strategic high-tech business consultant, says that during the last six years, the mobile phone industry has seen tremendous changes, especially in the high-end handset area. “It is easy to view these changes as revolutionary when they are just the natural progression of Moore’s law in hardware,” he says. “According to this simple rule, we have seen 16 times the improvement in processing power, display technology, and memory and data speeds.”

Steve Bell, a mobile Internet and wireless technology professional, says industry change is cyclical over a 10 year period and looking back is a good indicator of what will happen in the future. “Each new technology generation shift and convergence of services has given opportunity to new or existing players to showcase or revitalize their offering,” says Bell. “And, this is often a stumbling block for leading companies that may need to change their business model.” Bell has the following insights on what’s behind the shift now:

  • Symbian /Ovi emerged in 2G and faltered in 3G because of the Apple OS and app store.
  • RIM created the smart phone then lost its edge to Apple on touch screens and apps.
  • Vertically integrated suppliers could not compete with low cost Far East components and software assemblers.
  • Japan dominated analogue then lost out on digital in GSM.
  • Motorola dominated voice quality and packaging (StarTAC & RAZR), but struggled with software simple user interface for GSM and 3G.
  • Samsung and HTC emerged as 3G and 4G innovators.

And, what the industry may be in for in the future:

  • Nokia will fade because of its inability to drive cost and by being out innovated at the high end while struggling to merge cultures and shift software platforms. Microsoft may try one last effort in the mobile space and acquire Nokia.
  • Samsung has the R&D cycle time, funding, and rich selection of in-house consumer electronic knowledge and components to reshape the landscape of 4G devices.
  • Sony and LG will fade in the 4G world and may end up merging with Motorola.
  • RIM will focus on privacy, security for enterprise devices, and applications as its core with consumer-centric designs to enhance appeal.
  • Motorola’s transition to Android will need to be married with uniqueness of experience and 4G performance. The core devices will be accessorized and personalized then harnessed to create digital media living room capability.
  • Apple, as it becomes ever more popular, runs the risk of losing it cache and may become vulnerable to increasing hack attacks. Consumer expectation for cutting edge technology and great design will strain the company and impact its flawless reputation.
  • ZTE and Hauwei will dominate the top three slots for volume with Samsung.
  • 4G and digital device commerce and security will be the next battleground.

By Maureen Aylward

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