Ben Wood and Carolina Milanesi

1
Mobile Terminals 2004 Device Diversity Drives
Most Competitive Market ever seen!

• Ben Wood and Carolina Milanesi
• Gartner Mobile Terminals Worldwide Research

2
Wireless Mobile Communications Research
Mobile Data Applications
Mobile Services (Operator data)
Mobile Terminals
Wireless Infrastructure
Combine key areas to give a complete overview of
the mobile market to a wide range of customers
3
Mobile Terminals market - current performance
4
Mobile Terminals- a 500 million unit market -
ANNUALLY!
Mobile Terminal Sales to End Users Worldwide,
1998-2007 (Thousands of Units)
Source Gartner, March 2004
5
A Market Dominated by 5 Key Players

• A highly concentrated industry globally
• TOP 3 players account for 60
• TOP 6 players account for nearly 80
• Growth by Samsung, LG and Siemens

Global Market Share of Top-tier Terminal Vendors
(Full Year 2003)
Source Gartner, March 2004
6
Mobile Terminal Market Share - Full Year 2003 -
Regional (WE / NA / AP)
Western Europe
North America
Source Gartner, March 2004
Asia Pacific (Excluding Japan)
7
Mobile Terminal Market Share - Full Year 2003 -
Regional (CEMEA / JP / LA)
Japan
CEMEA
Latin America
Source Gartner, March 2004
8
Direction of Mobile Terminals and Role of Device
Diversity
9
A Market of Device Diversity

• Physical divergence
• Fragmented market segments driven by fun,
  fashion, function and more
• Blurred boundaries between device types (e.g.,
  phone and PDA)
• Some high-end logical convergence voice data
  PIM Bluetooth ...
• Multiple device ownership
• Memory and CPU power grow
• Fragmented platforms Symbian (Series 60 / UIQ),
  Windows Mobile, Linux, Palm OS
• Fragmented architectureWAP, J2ME, BREW, .NET

Phone
Other
PDA
Fashion
10
A changing market?

• Some components are becoming commoditized
• Will this allowing more players to be active in
  the market in certain tiers?

In the high-end market, the entry barriers
becomes higher.
In the mid or lower-end market, the entry
barriers becomes lower?
Larger difference between high-end and other
components
Commoditisation
Strategic Alliance

• Basic component standardisation
• The number of components are fewer

• More need for competitive mobile services
• More need for competitive handset features

• Emerging new entrant vendors
• Expanding EMS/ODM manufacturing businesses

• Lower basic components prices
• Simplify manufacturing processes

• Component customisation issues arise
• Total amount of license fees and total amount of
  component prices become higher

• Fragmentation in 2 directions - some traditional
  vendors will migrate to higher end

11
Mobile terminals- vertical to horizontal - an
evolving trend?
Reference Design Integration - Motorola, Nokia,
Ericsson (EMP) etc.
Vertical Integration - e.g Nokia,Samsung, Motorola
Nokia, Motorola Openwave, Teleca
Application Software (UI, Browser)
Application Software (UI, Browser)
Drivers for change
Software (OS)
Software (OS)
Symbian, Microsoft, Palm Linux

• Worldwide standards
• Increasing complexity
• Open software platforms
• Emergence of specialists

Manufacturing
Solectron, Flextronics, Elcoteq, Jabil
Manufacturing
Components
Components
ARM, TI, Intel, Qualcomm, RF Micro

• all competencies in-house HW, radio, SW, design,
  manufacturing
• vertical integration

Source Gartner / Vodafone / Nokia
12
Convergence or compromise?

• Think of examples of successful converged
  devices?- Radio Cassette / CD- Integrated TV /
  Video (?)- Washer Dryer (?)- Clock Radio (?)-
  Do you have a calculator on your desk? (PC,
  Phone, Mobile Phone etc.)
• What will a phone / smartphone become?- Phone
  Music Player Games machine PDA etc.
• Early smartphones classic converged
  compromise- Not a phone / not a PDA?- Firstly a
  phone - then a PDA? - PDA - then a phone!

Extending functionality is an inherent compromise
untilthe device becomes a category in its own
right
13
The Emerging smartphone Market
Symbian Mainstream mfg. - Enterprise software
Windows Mobile Enterprise software -
Anti-Microsoft bias
Linux Chinese Market - Uncertainty
PalmOS First to market - Back-end systems
14
Network Operators vs. Mobile Terminals Vendors
15
Global Players consolidating in a Global market
Vodafone 28 countries 113m subs / Orange 27
networks 46m subs / T-Mobile 15 networks 62m
subs
16
Which megabrand will win?
Network?
Terminal vendor?

• Interbrand ranks Nokia as 6th most valuable brand
  in world behind Coca-Cola (1), Microsoft (2) and
  IBM (3)
• Nokia is above than Disney (7) and McDonalds (8)

17
Key trends Applications and content key areas

• Application and content strategy is becoming
  increasingly important.
• Devices are integral to the delivery of this
  content.
• For carriers to get these services to market
  quickly, there is greater interdependence on
  terminal vendors and applications/ content
  providers.

Single service to multiple handset brands
Content services defined byHandset Vendors
Content Strategy of OperatorDominant Over
Handset Selection
Service
SingleService
Service
Portfolio of Offerings
Service
Service
E.g., ringtones / Java specific to NMP
E.g., Handsets with specific functionality for
operator provided services.
E.g., Voice services requiringlittle device
proprietary features.
Content Strategy Development Increasingly
Important
Growth from delivering extra value to customers
carriers become integrators of applications and
services
18
Highlights from 3GSM World Congress 2004
19
Highlights from 3GSM- 3G handsets start to show
signs of stability

• Ericsson 3G-interoperability booth
• Products from many vendors LG, Motorola, Nokia,
  Samsung, Sanyo, Sharp and Sony Ericsson
• Attractiveness of critical applications improving
  Video telephony, streaming etc.)
• Sub US300 product demanded by operators

20
Highlights from 3GSM- Smartphone category
gathers momentum

• Symbian / Series 60 platform current market
  leader - 6600 sells 2 million units
• New licensees Panasonic X700 launched
• Symbian ownership battle continues
• Microsoft gains momentum with Motorola(and
  Sagem)
• Pocket PC evolves

21
Highlights from 3GSM- Terminals with Wireless
LAN announced

• Integrated Wireless LAN arrives as predicted
• Business case remains unclear- Battery life,
  use case, VoIP?
• Alternative solutions? SD-IO

22
Highlights from 3GSM- Camera phones gather
momentum

• First mega pixel cameras for the WE Market
• MMS inter-op improving but emerging challenges
• Kodak launches Kodak Mobile
• Blogging is the new buzz word

23
Camera Phones Ban Them or Bless Them?

• Enterprise Actions
• Assess the threat and respond accordingly.
• Establish a balanced policy of promoted and
  banned use.
• Train employees on technology use.
• Ban camera phones or just pictures?
• Designate sensitive areas for inspection.
• Potential External Party Actions
• Government regulation?
• Koreans putting warning tones when a picture is
  taken into phones. Enough?

24
Highlights from CeBIT 2004
25
Highlights from CeBIT- Giant portfolio from
Samsung

• Impressive range including 3G phone, Music
  Phone, Camcorder phone, World phone
• Smartphone strategy still unclear

26
Highlights from CeBIT- Nokia announcements
disappointing

• Only one new phone announced - Nokia 7610
• Changing strategy by Nokia for product intro
• Lifeblog - a solution to explosion of digital
  media on mobile terminals

27
Highlights from CeBIT- Sony Ericsson focuses on
Cameras

• New products focusing on imaging
• Building on success of SO505i in Japan
• Challenges in 2004

28
Highlights from CeBIT- Key Themes

• Colour camera clam no longer a differentiator
• New form factors emerging (sliders, swivels etc)
• The Asians are coming BenQ, Innostream, Haier,
  DBTel, Curitel etc.
• Memory a big issue (MMC / SD / Memory Stick
• 3G is closer than we thought

29
Conclusions Key Industry trends

• Nokia dominance continues
• Growing threat from Asian Vendors
• Device diversity - new device categories
• Device commoditization and lower barriers to
  entry
• Brand co-existence with network operators
• Creation of eco-system encouraging new apps
  services

30
Further information

• Gartner 3GSM report- http//www3.gartner.com/Dis
  playDocument?id427820refg_forwardcallemail
• Mobile Terminals Market Share - Full year 2003-
  http//www3.gartner.com/DisplayDocument?id427009
  refg_forwardcallemail