The Mobile Handset Market … Actors and Interactions (part I)Thomas Menguy | February 23, 2006
Here is a high level presentation of the mobile handset industry channel….from what I’ve understood, and from my own Open-Plug/Texas Instrument perspective.
This is by no way a yet-again-prediction-about-the-mobile-phones-market: no I won’t say here that the next big thing are Ultra Low Cost handsets …more than very high end smartphones
First the main actors of this drama (ok, I do my best to mimic the gfx of the great schemas from the Kathy Sierra’s blog):
In nearly square boxes, the companies that are part of the flow, from the handset idea till the real device in customer hands:
- OEM (Original Equipment Manufacturer: wikipedia definition): In this industry the OEM term is perverted a little, the OEM are the companies with Brand Name (in fact value added reseller or VAR), like Nokia, Sony-Ericsson, Siemens, Philips etc. More and more they are outsourcing handset design to ODMs and production to an EMS (that can be the selected ODM itself).
- ODM (Original Design Manufacturer: wikipedia definition): Design House that are technically creating the device, based on OEM requirements, or in other models directly from operators requirements, or from their own to sell their design to OEM/operators. Well known ODM are HTC, Compal, Wiz4com, Cellon, Foxconn, BenQ (Chinese and Taiwanese companies for the most).
- EMS (Electronics Manufacturing Services: wikipedia definition): The factories that are actually building the devices…and and we are in a 400 millions units market… those are BIG factories.
- Operator/Carrier (did you say telco?): Another kind of beast for the handset part of the mobile industry equation. They can be either the key driver for handset specification (see Docomo), or a simple distributor.
- Distributor : retail shops that can sell “unbranded/unlocked” headsets that can be used with any service provider (operator), or directly resell operator branded phones with a service plan.
On the supplier part of the flow:
- Platform Vendors : Here is the main hardware supplier of the chain (Ok I’ve intentionally omitted all the zillion of different other hardware suppliers involved: flash, screen, boards, plastic, etc), the one that sells the heart of an headset, its chipset. This chip is comprised of the CPU and the associated RF/Analog baseband/Digital Baseband. In this area the undisputed leader is Texas Instrument (used a lot by Nokia, Sony-Ericsson, Motorola and many ODM), followed by Philips Semi Conductor (main client: Samsung, and many other OEM/ODM). Many other platforms like ADI, Infineon, etc. are also represented. Nearly all those platforms are now backed by an ARM CPU.
And now the most interesting (hehe, ok at least for me) SOFTWARE! which is now the undisputed … bottleneck of the industry. Traditionally the Platform Vendor were integrating all the needed parts of the software…without making any money from it. But with the explosion of the number of functionalities, software actors are becoming more and more prevalent.
- Integration House: A first answer to those integration issues was to outsource it to other companies with large and dedicated software resources.
- IP vendors: We spoke about features…Here are the backers of those features. Need a Java VM? asks Esmertec, a wap browser? Openwave, Jataayu, Teleca, An predictive input text method? AOL/T9 or Izi.
- OS/FWK vendors : The hardware part being so heteroclite, and the time to market so hampered by software IP integration, this new kind of players are emerging, becoming a key enabler for IP vendors by reducing their integration and porting efforts, thus the time to market. On the OS side, Symbian, Microsoft and Palm are the leaders of the … little market of the smartphones (forecast are, in the best case, around 15% of the market). On the framework side (for all the other phones) key players here are TTPcom, OpenWave, Teleca (obigo) plus some new comers like SkyMobile Media … and of course Open-Plug .
So after the presentation of the actors…here are their interactions!
We will present here some of the main channels that are best describing the process of designing and selling a mobile phone.
- OEM oriented: the OEM is pushing its ideas/designs till the distribution channel.
- ODM oriented: ODM are selling their designs to OEMs.
- Operator oriented: Operator is defining the device design/requirements.
- A: The “historical” channel. An OEM is making its devices form A to Z, from design to production, using only platform vendors for their silicon factories, providing their own hardware design and not using “standard” platforms. Nokia is perhaps one of the last of its kind (but recently outsourced some handset to Foxlink if I remember well).
- B: An OEM specifies a handset and then go shopping to get an ODM which will be able to design the handset an produce it (perhaps via an EMS).
- C: In that case an ODM designs an handset and sells the design to an OEM that will simply stamps its brand on it (HTC is working like that).
In those channels the operator is only seen as a distribution channel, only able to validate or not an handset. Anyway more and more Carriers are asking for branding and customization…and it’s not so easy to convince Nokia to replace its brand by a Vodaphone or Orange one.
- D: Very similar to B, but this time the carrier specifies itself the handset and is feeling strong enough to get ride of and replace a big handset brand name (OEM), see the HTC operator branded phones (orange, O2).
- E: The Operator is “fully” specifying the handset, like in D but will associate its branding with an OEM one (that itself will most of the time outsource the design and production to an ODM/EMS).
Keeping all that in mind, a next post will describe the software flow and what are the impact and implications of those channels, the eco-systems around hardware platforms, and the various software strategies deployed in the industry