MGD424

The Mobile Device Industry

By: Joyce Tanjuakio

Date: April 16, 2005

Table of Contents___________________________________________________ 2

The Mobile Device Industry___________________________________________ 3

Description of Business_____________________________________________________ 3

Business Environment_______________________________________________________ 4

Products___________________________________________________________________ 6

Mapping and Positioning_____________________________________________________ 6

Animated Picture Messaging___________________________________________________ 6

Multimedia Messaging (MMS)__________________________________________________ 6

Entertainment______________________________________________________________ 7

Industrial Applications________________________________________________________ 7

eCommerce_______________________________________________________________ 8

Competitive Environment____________________________________________________ 8

Key Strategic Issues: Threats and Opportunities__________________________ 9

Replacement Cycle__________________________________________________________ 9

Mobile Data Services_______________________________________________________ 11

Enabling Technologies______________________________________________________ 11

Value-Added Services______________________________________________________ 12

Software Platforms_________________________________________________________ 13

Security_________________________________________________________________ 14

Conclusion_______________________________________________________ 15

Works Cited______________________________________________________ 16

The Mobile Device Industry

Description of Business

Mobile devices are defined differently according to the author. Because of the convergence of technologies, namely of telephone capabilities with personal data assistants or vice versa, defining devices have become more difficult. It has become a chicken and an egg situation where it is difficult to identify if the product is a personal data assistant (PDA) with phone capabilities or a phone with PDA capabilities. For the purposes of this paper, the mobile device market will be defined as handheld devices, wireless handhelds, feature phones and smart phones. Additional terminology used will be from Canalysis’ definitions:

o Feature phone – devices that are pocked-sized that are positioned primarily for voice usage. Feature phones offer two-way data synchronization that is configurable and OS-based applications cannot be added without restriction. E.g. Nokia 7650

o Smart phone – devices that are pocket-sized positioned primarily for voice usage and offers full, configurable two-way data synchronization, and OS-based applications are able to be added without restriction. E.g. Ericsson P900

o Handheld – devices that are pocket-sized positioned primarily for data, without integrated wireless WAN capability such as GSM, GPRS or 3G. E.g. palmOne Tungsten T3

o Wireless handheld – devices that are pocket-sized positioned primarily for data with integrated wireless WAN (GSM, GPRS or G3) capability. E.g. O2 xda II, Research In Motion (RIM) BlackBerry series.

o Data-centric devices – devices that are handhelds and wireless handhelds.

o Voice-centric devices – devices that are feature phones and smart phones.

o (Canalysis, 2004)

These aforementioned devices are what constitute the mobile devices market. Some industry leaders are exploring different designs for future 3G phones. Below are examples of 3G concept mobile devices.

Left to Right: Nokia, Ericsson, Ericsson and Siemens (source: GSMworld.com, 2005)

Business Environment

According to Nokia, the mobile device business environment is changing rapidly in many different sectors. These changes in the business environment will drastically change the way mobile device companies do business as well as changes in the products and services offered. Nokia forecasts that there will be changes due to increased access to mobile communication especially in developing countries (Nokia, 2005). There are also increasing needs for end-to-end solutions. End-to-end solutions are described as solutions providing both hardware and software elements. Mobile devices are learning towards following the evolution and trend of customization in consumer electronics (Nokia, 2005). The present business environment demands mobile device businesses to be vigilant, agile and flexible to adapt to market changes.

Convergence is also playing a role in the mobile device business environment. The converging technologies that affect the mobile device market the most are mobile communication, information technology, media and consumer electronics. Some of the features now available with telecommunication mobile devices are:

1. Mobile devices and camera phone

2. E-mail, web, application and music

3. Multi-radio solution and devices

4. Transfer connectivity among cellular networks and complementary access – e.g. WAN and Bluetooth

(Nokia, 2002)

Currently, the wireless handhelds category is the fastest growing with a 194% increase on Q2 in 1003. Specifically in North America, the shipments of wireless handhelds exceeded smart phones. Globally, there is an increase of WAN wireless capability devices by 10%, with the growth mainly coming from outside of North America (Canalysis, 2004).

Products

Some products in this industry include a variety of different features. Some of the most popular features that can be found in mobile devices are:

Mapping and Positioning

Global Positioning Service (GPS) transceivers are included in mobile devices to enable users to identify the user’s location. Such applications are to look up directions for a particular location. In addition, Scalable Vector Graphics (SVG) format are an important factor for map graphics.

Animated Picture Messaging

Messaging is increasing in popularity in cell phones. Messaging between users can include sending and receiving ring tones, picture messages, business cards, operator logos, calendar, and Internet settings over wireless messaging.

Multimedia Messaging (MMS)

Multimedia Messaging (MMS) is gaining popularity with increased quality in built in cell phone cameras and video capture. Multimedia messaging is a continuation of SMS and Picture Messaging. MMS lets users exchange messages that are rich content types including natural images; video clips; voice clips and animated, interactive graphics. Nokia recognizes a growing trend in MMS. (Nokia.com, 2004) MMS attempts to deliver a complete communication experience by providing content-rich messages. In order to use MMS, the user only needs a mobile device that is 3G and the receiving device must also be enabled to receive MMS.

Entertainment

Entertainment capabilities in mobile devices include games and cartoon animations. These highly graphical applications are developed using mobile SVG profiles. (W3C, 2001) Nokia’s N-Gage mobile device targets a demographic that is interested in portable games such as Nintendo Gameboy. The N-Gage features highly graphic games such as Tomb Raider and each game is a removable chip that can be purchased separately for the N-Gage (Nokia.com, 2004). The N-Gage also includes a low-capacity media player for MP3s and radio. The phone capabilities almost become a more subdued feature in the background.

Industrial Applications

Field engineers locating and dealing with time critical construction and maintenance problems will be able to view maps and engineering plans in the field, on demand.

Sales personnel for building companies use mobile devices to add buyer information with regards to additional house options and homeowner contracts to a central database.

eCommerce

Graphical views of stock data are available on mobile devices enabling day traders to check stock status and instant online trading away from the desks and while they are on the go.

Competitive Environment

The key industry players include Sony Ericsson, palmOne, Nokia, RIM, Motorola and HP. Currently, the overall mobile device market in 2004 increased in volume by 45% from 2003. Data-centric devices such as personal data assistants (PDA) increased by 26% with PalmOne leading with HP and RIM trailing closely. Voice-centric devices, including smart phones or feature phones increased 70% in volume with Nokia leading in this segment and in the overall mobile devices market. (Canalysis, 2004)

HP, unlike Nokia and palmOne, is a data-centric mobile device, however, it holds third place in the market. HP continues to have a strong presence and performance in the EMEA. RIM, the wireless handheld vendor, captured approximately 8% of the market and has enjoyed a 333% growth in comparison to other leading vendors. RIM’s growth is mainly within North America, Europe, Middle East and Africa. . Sony Ericsson, on the other hand, with its smart phones is fifth in the mobile device market with its P800/P900 series. Sony Ericsson’s voice-centric devices remain behind Nokia (Canalysis, 2004).

Key Strategic Issues: Threats and Opportunities

Some of the strategic issues that mobile device companies are currently facing include the following:

Replacement Cycle

The replacement cycle of a mobile device affects how often the consumer replaces the item. Nokia estimated that their consumer’s replacement cycle is approximately 2.5 years and that this cycle is lengthening (Nokia.com, 2004). However, some analysts speculate just the opposite. With the rapid development of new devices and services, the replacement cycle is said to be shortening instead of lengthening, accelerating the growth in the handset (PDA Cortex).
An Allied Business Intelligence Inc. study forecasts that the amount of replacement mobile devices, specifically wireless handsets will grow from approximately 211 million in 2002 to 591 million by 2008, representing 85% of all shipments worldwide PDA Cortex).

For a converged technology, one of the biggest disadvantage of integrated mobile devices is that the entire device must be upgraded (Zetie & Smiley, 2002). The features are not divisible in the mobile device. For example, the move from a second generation (2G) device to a third generation (3G) requires complete replacement of the old existing device to a new device. In addition, different features, such as the phone and personal data assistant (PDA) have unparallel replacement cycles that may not coincide with the user’s needs (Zetie & Smiley, 2002).

Mobile Data Services

The existing networks are feeling pressure from the different data services currently available. With the dawn of the 3G technologies, there now exist a variety of data services in the wireless infrastructure market such as GSM, Edge and W-CDMA. W-CDMA is a standard proposed by Ericsson that stands for wideband CDMA. W-CDMA allows for transmission of text, digitized voice, video and multimedia at data rates up to 2Mbps. Higher bandwidth in 3G networks allow new services such as video conferencing and multimedia streaming. This consequently affects the mobile device market in choosing which infrastructure to build compatibility into the products. Currently, Ericsson is the world leader in 3G supplier, forecasted 2003 revenues to increase from $30 Million USD to approximately $21 billion in 2004 for m-commerce alone. (Van Slyke & Belanger, 2003) NTT DoCoMo also launched its 3G service called FOMA (Freedom of Multimedia Access) offering I-mode access, which provides a standard of minimizing web pages for smaller screens, at faster speeds, yielding new applications such as video telephony and simultaneous use of data and voice services. NTT DoCoMo has also captured 60% of the Japanese market as of 2003. (Van Slyke & Belanger, 2003)

Enabling Technologies

A strategic issue that affects the mobile device industry is the availability and advancement of enabling technologies. Miniaturization of chips and 3G infrastructure are a big player in determining what features will be included in the mobile device.

Value-Added Services

Another key trend in mobile devices are value-added services where the device offers a variety of features instead of just one. Feature-rich devices now incorporate color screens, advanced data and messaging applications, web navigation, multimedia messaging (MMS) and instant messaging.

In the image above from Forrester Research, this shows the relative strengths of various devices as phone or personal data assistants (PDA). When users are selecting a mobile device, each device must be evaluated based on the different criteria for example, operating system platform, network coverage and battery life (Zetie & Smiley, 2002). Industry leaders in mobile devices must consider these issues to position themselves in the market that they are target.

Software Platforms

Some issues with regards to mobile devices are the shifting area of software platforms. There are several kinds of software platforms currently available such as:

o Java TM – This platform enables the usage of third party consumer applications such as mobile games. In 2004, all major mobile device manufacturers used Java TM. (Nokia.com, 2005) Java TM’s importance is increasing in the delivery of mobile enterprise services and applications. (Nokia.com, 2005)

o Symbian OS: In 2004, key mobile device manufacturers launched smart phones with Symbian OS. Symbian is an open OS standard created for mobile devices.

o Series 60: Series 60 is a market leading software platform licensed by handset manufacturers including Nokia. Series 60 is designed to run on top of Symbian OS, allowing for operator and end-user specific customization and license differentiation. As of 2002, industry players represent 60% of handset phones adopted Nokia’s Series60 software (Nokia.com, 2005)

o Linux – Motorola brought its first Linux phone on the market in 2003 and introducing between eight and ten in 2005. Smartphones running on Linux currently represents over 10% of mobile phone sales in China. However, Linux has not penetrated the North American mobile devices. Linux also developed an OpenPDA software stack for smart phones. In 2004, PalmSource announced its plans to migrate to Linux.

As of 2004, the leading mobile device software platform vendor is Symbian, acquiring 36.5% of the market. Trailing in second is Microsoft with 22.9% and PalmSource with 22.5% market share. (Canalysis, 2004)

Security

The introduction of 2.5G and 3G mobile devices are no longer safe houses from viruses. Today’s smarter mobile devices are attracting the unwanted attention of hackers, attackers, and scammers (Ostergaard & Zetie, 2004). The emergence of worms, viruses, and Trojans for mobile devices serves as a warning about security issues of PDA and smartphone operating systems. Users must become vigilant about security measures for mobile devices, especially for enterprises with mobile devices that connect to mission critical systems (Ostergaard & Zetie, 2004). IT management must include mobile devices in its security measures within the enterprise. In addition, mobile device industry players should integrate safety into mobile devices to garner more loyalty from customers.

Conclusion

Today’s mobile devices are leaning towards creating the single mobile device that will converge everything: e-mail, browsing, personal data assistant (PDA), phone, mapping, gaming and more. However, the main factor that cannot be ignored when creating these devices is identifying the primary use of the item – whether data-centric or voice-centric. There are also strengths and weaknesses that are inherent in converged mobile devices such as expandability of memory storage, applications, synchronization, battery life, usability of keypads and physical convenience. With the increase of data transfer on the Internet, the threat of gaining viruses over IP connection for mobile users will become a growing concern. Security and privacy for mobile device users will be an issue to be addressed with the adoption of 3G technologies. Overall, converged technologies promise the all-in-one mobile device however in reality, the primary feature must be met well with the rest performing satisfactorily. The industry players must segment their market according to primary uses and market mobile devices based on their target audience and not how many features can fit in one device. The ultimate driver to success is meeting your customer’s needs.