Handsets Reach a Crossroads

Electronic Business has a lengthy feature article on the handset industry and how it is getting pulled in all kinds of directions as new features and services are developed. The article looks at the components business and notes "opportunities appear almost endless to supply new and better processors, radios, storage devices and other parts. That story line is just fine with component vendors; with more than 700 million handsets sold in 2005, the mobile phone is the current king of volume."

However, predicting what will be the next big thing creates uncertainty throughout the supply chain. Alan Brown at Gartner said, "Increasingly, component suppliers will be asked to support services that have not yet developed a substantial market but show some future promise."

One prediction is mobile videoconferencing. Andy Castonguay at Yankee Group said, "Cingular, for example, by the end of 2006 should have pretty decent UMTS coverage, which really does facilitate videoconferencing. Our expectation is that carriers will have good access to a wide variety of handsets that are going to be enabled for that type of activity. If a handset can accommodate incoming media streams, there's no reason it can't also handle outgoing streams. Many of the components can easily support both modes."

Another potential area is VoIP. Castonguay said, "I think it will be a pretty small market niche for the next year. But depending on how successful handset and carrier vendors are in making it easy to use and a true value, I think you may see some interesting uptake."

For obvious reason, carriers might not be so keen on offering dual mode handset "It's unlikely that carriers alone will be able to halt the rollout of a technology customers want. For many carriers, the handwriting is already on the wall," Castonguay said.

One of the biggest challenges is predicting what consumers actually want. According to a recent In-Stat survey, 70 percent of cell phone users are either "not at all interested" or "not very interested" in having a phone that plays music files. Only 30 percent expressed some level of interest. Less than 11 percent of the respondents were very or extremely interested in broadcast TV functionality.

David Chamberlain at In-Stat said, "There's this big gap between what the handset vendors are providing and what consumers are really asking for. One of the basic underlying things is that people aren't that interested in fancy uses of their cell phone. Even text messaging is one of those features that goes unused by many people."