November 22, 2010 Executive Technology Strategies ets 10-11-12 Devices and Components Lead Analyst



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November 22, 2010 Executive Technology Strategies ETS 10-11-12

Devices and Components
Lead Analyst: Caroline Gabriel, Rethink Technology Research
This article is a review of current developments and market impact of smartphones and such.

Hope for LG as it shifts 1m smartphones in 40 days
LG has had a miserable year, making scarcely any impact on the smartphone market and seeing its margins slide in consequence, and its brand eclipsed by that of compatriot Samsung. However, there are signs that it may achieve a turnaround in high-end devices next year, comparable to that that of Samsung, which aims to increase its smartphone share from about 2% to 10% within a year of launching its Galaxy S flagship. LG has crossed the important milestone of selling one million units of its own key smartphone, Optimus One, 40 days after it shipped – five days earlier than Galaxy S did the same.
However, it is taking a very different approach, pushing affordable massmarket smartphones rather than a premium device like Galaxy S or HTC Desire - pitching it against Nokia’s C Series rather than N Series, and against ZTE.
The Optimus One, like Nokia’s C7, aims to lure first time smartphone owners, particularly younger users or people in emerging economies where 3G is rolling out. Also like C7, it does this on two fronts – with a low price tag that works in markets where prepaid is the norm, like India; and by packing advanced software features, like the latest Android OS, Froyo, even into a lower end product. The cost efficiencies come in hardware areas – the camera is only 3.2-megapixels, very low for a vendor that has gone over 10-mp on some proprietary mediaphones; and the processor is slower and resolution lower than on high-end models.
These allow LG to price the phone almost at featurephone levels (a contrast with Microsoft Kin, which was a featurephone at smarpthone prices). The Optimus One is available in many European and Asian territories plus the US, with a huge range of contracts or upfront fees, but the unsubsidized price is generally around $230, less than half that of a high end smartphone. T-Mobile USA is offering it for $30 with two-year contract.
LG said Optimus One was the fastest selling handset in its history and it expects it to be its first device to hit 10m units. It was “designed to provide an easy transition into the world of smartphones and as these numbers demonstrate, there is obviously a strong demand for this type of device,” said Jong-seok Park, CEO of LG’s mobile division. “Smartphones aren’t just for early adopters any more.” By yearend, the phone will be available via 120 carriers and partners.
Google Plays Safer with Nexus S and T-Mobile
Surely against its better judgment, Google is to launch an own-branded smartphone again, despite the commercial failure of its Nexus One. Now it will work with Samsung on a “Nexus S‟, though the ambitions of this second phone are far less sweeping.

When Nexus One appeared, it came with a new approach to sales and distribution that aimed to reduce the role of the carrier and take a step towards Google’s broader goal of open access. But cellco apathy and competition from other Android big hitters – such as the HTC Desire, the design on which the HTC-made Nexus was based – meant Google’s device only really succeeded as a developer platform (it got all the Android updates first).


That looks likely to be, more deliberately, one of the reasons for Google to dip its toes in handset waters again, as well as to stir up attention for new releases of its OS, showcasing upcoming features like a reworked user interface. Google hopes to make a sufficiently strong user experience that it can cajole vendors into harmonizing their Android implementations rather than fragmenting it among vendor specific UIs like HTC Sense.
Nexus S has left behind the failed direct-to-consumer model, and will – according to leaks published on various Android blogs – launch in the US in time for the holidays, but exclusively with T-Mobile. The “S‟ featured, with TMo lock-in, on a web page for retailer Best Buy, though the page has subsequently been removed and no vendor has confirmed the product officially.
Google has switched its manufacturer affections to Samsung, and the Nexus S will be yet another variant of the Galaxy S, which already sells, under various brand names, at all four national US carriers plus US Cellular. It will be upgraded to a 1.2GHz Hummingbird processor though. The “Nexus Two‟, as it was previously known, was widely expected to be made by Motorola, which had planned to create a business oriented handset for Google earlier in the year, a plan that was cancelled after the damp squib of the original Nexus.
Now it seems Google is focusing on the most impactful Android device of the moment, as it did with HTC, and bringing Samsung into its inner sanctum – both bad news for Motorola, which was clearly seen as Google’s flagship Android partner when it launched its first Droid a year ago, and which is struggling to maintain profile and market momentum now that Samsung has brought its huge resources to bear in the market.
Nexus S will be welcome to developers and truly cutting edge Android users who do not want to tolerate the uncertainties of carrier updates every time an OS upgrade appears. The phone will run the upcoming release 2.3 or Gingerbread, and a Google UI without carrier (or Samsung) overlays and preloads. It will offer a first look at some new features such as built-in video chat and native VoIP, plus some new gaming capabilities, according to reports. It might even be sold via Google’s online store, as well as TMo, again, though this was the aspect of the strategy that most annoyed operators – but according to GigaOM, Andy Rubin, VP of engineering, says the company is still interested in selling unlocked phones via its own shop.
The Nexus One sold 135,000 units over its first 74 days. By contrast, the Motorola Droid, the Galaxy S and the original iPhone sold over a million units over their first 74 days on the market.
Samsung Backs ARM’s Souped-up Graphics Platform
Samsung is the first major vendor to adopt ARM’s latest graphics chip, giving a significant boost to the smaller company’s bid to extend its dominance in processor design into the GPU. Samsung is an existing user of ARM’s Mali graphics technology, but its continuing support will enhance ARM’s confidence against rival IP supplier Imagination Technologies, especially as GPUs become more important in mobile devices.
The new Mali T604 platform, unveiled at ARM’s developer conference this week, aims to bring high performance applications like 3D imaging and gaming to smartphones, without sacrificing battery life. The upgraded graphics processor will accelerate video applications while drawing less power, said marketing director Ian Smythe, and will handle 3D imaging and full HD video. Performance is up fivefold on the previous Mali, and when included in a chip, the core consumes less than 850 milliwatts.
Mali is designed to work with ARM’s latest CPU core, the Cortex-A15, which targets smartphones, tablets and even servers. Up to 16 2.5GHz cores can work together for these larger systems.
Mali T604 will be compatible with Microsoft's DirectX 11 and with OpenCL 1.1, both programming frameworks for parallel processing over multiple cores. The inclusion of DirectX 11 aroused speculation that this programming technology would soon be supported fully in Windows Phone 7. Currently, full compatibility with DirectX 11 is only seen in Windows 7, but that does not run on ARM processors (though its ties to the Intel x86 design may be broken at last if ARM moves up to servers).
OpenCL is a C-like programming language with APIs for parallel execution and is supported by many heavyweights including IBM, Apple, Intel and Nvidia. Meanwhile, Imagination Technologies has agreed to acquire HelloSoft, a supplier of IP for video and voice over IP (VVoIP) and wireless Lan. It will pay up to $47.1m ($26.9m of that paid over three years subject to performance), and announced a share issue to help fund the purchase.
Imagination said the acquisition would give it access to "leading edge and highly respected" VVoIP technology that would complement its own PowerVR multimedia processor IP. It also gains control of a WLan roadmap that it was already using for its Universal Programmable Communication Platform.
Microsoft Kin May Get Reprieve
Leaked documents from Verizon Wireless suggest the Microsoft Kin handsets may be making a comeback. The youth-oriented social phones were launched exclusively earlier this year but soon afterwards, Microsoft said it would end development to focus only on Windows Phone 7.
However, an internal Verizon memo leaked to the PPC Geeks blog shows the Kin One and Kin Two as part of the product line-up for the holiday season. As before, both devices have touch-screens and Qwerty keyboards and are geared to social and messaging applications, as well as being integrated with the music service Zune Pass. The One has a 5-megapixel camera and 4Gb of memory, while the Two is a bit more highly spec’d, with 8-mp camera, HD video and 8Gb.
The Kin performed poorly when first launched in April and only got a handful of international deals, all quickly curtailed. Although years of speculation and build-up had attended a Microsoft musicphone, variously known as “Project Pink‟ and the “Zunephone‟, by the time the products surfaced WP7 was close to launch, and far more strategic for the Windows giant. And the Kin models sat uncomfortably between mass-market featurephones and true smartphones, with the pricing closer to the high end. Pricing included a minimum data plan of $29.95.
That was one mistake when going for the largely prepaid youth market, where separate data plans are considered the preserve of true smartphones. This time around, sources say Verizon will dump these plans and sell the Kin products either with standard voice/text contracts or prepaid.
It seems clear that Microsoft is only superficially involved. When it backed away from the project in July, it handed all the updates to Verizon, keeping the option open for the carrier to release those upgrades and sell the phone in its own right. Other observers speculate that Verizon is merely clearing old inventory.
The Kin’s premature death also sounded the death knell for the Danger Sidekick, a far more beloved device that was acquired by Microsoft and provided the basis for Kin. However, with the Kin now Verizon’s own project, there is no prospect of Danger’s products or teams re-entering the scene, expect in their contributions to WP7.
Microsoft once had broad ambitions for “Project Pink‟ – to create a combined hardware/content platform under its own brand, as in the Xbox games console and Zune media player – but these had been overshadowed by the changes in the smartphone market, which required a more heavyweight response, and the shift of power from devices to web services and the cloud. With Microsoft determined to make WP7 a major smartphone player, Pink had become an unwelcome distraction.
The company has not revealed how much the Kin launch, which involved significant TV, web and print advertising, cost it or Verizon, and never released sales figures, though CNet said it learned from sources that these had been well under expectations – “more than 1,000 but south of 10,000”. Verizon’s official response was: "We don't share sales data or marketing strategies but the device remains an important part of our portfolio."



Editor’s Note: This article directly and indirectly addresses many different aspects of Smartphone development, Vendor markets and technology in general.
Vendors are still trying to push their products and increase market share by adding and enhancing features. Vendors continue to enter and exit the market as they are trying to enhance their revenue portfolio, but then have to content with the realities of corporate identity, culture and challenges on all product/service fronts.
The features/capability threshold that separates hand held computers and smartphone continues to blur.
Semantics continues to be (and will always be) an issue as new terms are introduced, adopted and misused. VVoIP and milliwatts as examples (Back to the Future?).
Experture strongly suggests that unless you have a strong relationship with any of the vendors mentioned, that you skim over this information to gain an idea of the challenges that vendors and users face when trying to make strategic decisions. This insight is critical when making platform and user decisions that will dramatically impact the user’s ability to effectively compete in today’s (and tomorrow’s) business environment.



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