Friday, August 05, 2005

Competition and Pricing Pressures Hit Display Market for Mobile Devices

Two analyst firms, iSuppli and ABI Research, take a look at the market for displays for mobile devices and come to a similar conclusion: competition and industry standardization is putting intense downward pressures on pricing.

iSuppli analyst Vinita Jakhanwal writes a technical analysis in DigiTimes that finds LCD screens used for cell phones are becoming more standardized. This "is expected to reduce costs, cut development time and increase competition among suppliers, possibly leading to the availability of better phones at lower prices."

Jakhanwal reports that Nokia's use of "common parts and designs appears to be a general philosophy, one that extends beyond the display. Teardowns revealed that many of the company’s phone models are so similar that the only difference is the plastic covering." The iSuppli teardown analysis of handsets also showed that Motorola sported more higher-end displays than Nokia, and Samsung "had the highest penetration of TFT LCDs in its main phone displays."

At ABI Research, new research findings show that the "expansion of small-display production has been fuelled mainly by the exponential growth of cellphone shipments, which account for about 75% of the market."

Analyst James Seifert states, "This rapid expansion is drawing many new competitors into the marketplace — both current display makers who have excess capacity, and others who simply see the sector's enormous potential. The downside is that the added competition puts tremendous pressure on prices. So while there's remarkable growth, nobody seems to be making a lot of money out of it."

Like iSuppli, ABI comes to the conclusion that market is closer to commodization "as larger manufacturers settle on standard designs in order to squeeze weaker players and benefit from economies of scale."

The main takeaway from both reports? Handset manufacturers are reducing parts and recycling designs to improve supply chain efficiencies and speed product to market. Good for us consumers, but painful for the display suppliers...