Mobile Phones Industry

The Economist writes about the changes in the business even as the phones themselves are evolving:

The mobile phone has become a uniquely personal item: many people take theirs with them even when leaving wallets or keys behind. Some phones designed for business users can send and receive e-mail, and have tiny keyboards; others aimed at outdoor types have built-in torches; still others have satellite-positioning functions, high-resolution cameras with flash and zoom, and even the ability to record and play video clips. Clearly, phones ain’t what they used to be.

This spectacular outward transformation of the mobile phone is being reflected by an internal transformation of the industry that makes what have now become the most ubiquitous digital devices on the planet. Over half a billion mobile phones are sold every year, and despite sluggishness in other parts of the technology industry, the number continues to grow. Sales are being driven, in part, by the surge of new subscribers in the developing world, particularly in India and China. In the developed world, meanwhile, where markets are so saturated that most adults already carry a mobile phone, existing subscribers are switching in droves to today’s more advanced models. Meanwhile, the number of mobile phones in use, at around 1.4 billion, overtook the number of fixed-line phones last year.

No wonder so many firms now want a piece of the action. The mobile phone sits at the intersection of three fast-moving industries: it is a communications device, computer and, with the addition of new media functions, consumer-electronics product. Indeed, it is the bestselling device in all three categories.

As a result, the firms that have historically dominated the industrylarge, specialised firms such as Nokia and Motorolanow face a host of new challengers as well as opportunities. The desire for ownership of each mobile-phone subscriber poses another threat to the incumbent handset-makers, as mobile-network operators seek to promote their own brands and to differentiate themselves from their rivals. The result is a little-seen, but almighty, struggle for control of a $70 billion industry: a battle, in short, for the palm of your hand.

The article has an extensive discussion on how ODMs (original design manufacturers) are changing the industry and the threat they pose to the existing branded handset makers.

The Economist compares the business with the car industry: “Less visibly, as the structure of the mobile-phone industry changes, it increasingly resembles that of the car industry (see article). Handset-makers, like carmakers, build some models themselves and outsource the design and manufacturing of others. Specialist firms supply particular sub-assemblies in both industries. Outwardly different products are built on a handful of common underlying platforms in both industries, to reduce costs. In each case, branding and design are becoming more important as the underlying technology becomes increasingly interchangeable. In phones, as previously happened in cars, established western companies are facing stiff competition from nimbler Asian firms. Small wonder then that Nokia, the world’s largest handset-maker, recruited its design chief, Frank Nuovo, from BMW.”

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Rajesh Jain

An Entrepreneur based in Mumbai, India.