Abstract

Market Focus Shifting to Consumer Segment, Accelerating Blurring of Boundaries between Product Types

Traditionally, Smartphones were converged devices designed to satisfy enterprise user demand for voice and PDA functions. Product specifications were pure, and they mainly featured QWERTY keypads or resistive touch screens using touch pen input. After the consumer application-oriented Apple iPhone successfully created a sales wave, almost all branded vendors started to covet consumer markets, which are larger than the enterprise user segment. Branded vendors rolled out many consumer models in the market, and they hoped to duplicate the success model of the Apple iPhone. As part of this development, not only is there significant downward pressure on prices due to the intense competition, product specifications are more diverse due to the lack of uniformity in the consumer market.

When users' function demand for Smartphones is no longer limited to business-oriented functions such as email, the importance of consumers' focus on elements such as camera resolution, multimedia and exterior design naturally increases. The target groups for the two different product types thus no longer differ significantly. Therefore, besides differences as to whether phones are equipped with OS, the boundaries between Smartphones and feature phones are no longer as clear as in the past. With the increasing share of the consumer market, these boundaries will become even more obscure.

Upstream Chip Suppliers and OS Companies Play Critical Role

Some consumers might not need the full spectrum of functions on a Smartphone, but only require a few basic features, such as sending and receiving POP3 e-mail, support for community applications, and the ability to download and operate mobile games. As the time needed to develop one feature phone is much shorter than the time needed for a Smartphone, and as costs are also lower, vendors are naturally faced with the challenge of how basic Smartphone elements can be integrated into the specifications of feature phones.

As the aforementioned features mostly revolve around application execution, these are closely related with the chipsets and application execution environment adopted by the phone. Whether or not chip suppliers and OS companies can provide support thus becomes a critical issue. Currently, the 3G chip supplier Qualcomm and Microsoft and its Windows Mobile have tried to strengthen software to complement areas in which the application execution performance of feature phones is not as good as Smartphones. In March 2009, Taiwanese chip supplier Mediatek and the middleware design company Vogins Technology jointly launched an own-developed mobile phone software development platform. This platform focused on increasing the breadth and depth of application software execution on feature phones.

Regarding long-term development, by creating new software development and execution environments, major chip suppliers and OS companies not only aid device vendors, but they can also increase their own power in the mobile phone industry.

Creating Total Brand Image, Strengthening Market Segmentation Key Issues for Vendors

In the past situation of clear market segmentation between Smartphones and feature phones, branded vendors could adopt different strategies for different market segments. As a result, there were evident differences in terms of competitive structure in the two product type markets. The combined sales volume of Samsung, LG, and Sony Ericsson in the Smartphone market did not differ much from HTC's sales volume.

As users' perception of Smartphones and feature phones is becoming increasingly blurred, the importance of adopting integrated strategies along a total enterprise increases. Samsung and LG provide uniform features for their products, including bright exterior design and touchscreen functions, and do not implement clear segmentation between the two product types. Nokia, which has a long history in developing the consumer market, has directly used its strategies used for feature phones, launching several models revolving around consumer functions and aiming to capture a share of the Smartphone market.

Among brands that solely concentrate on Smartphones, RIM has a clear positioning due to its pairing with enterprise servers and is expected to maintain is enterprise market share. Apple has a very strong brand power. However, HTC and Palm have relatively few product lines, and their products have relatively pure specifications and strong business characteristics. In the future, these two companies could be impacted by branded vendors that in the past focused on selling feature phones. Standing by their original business and protecting their overall brand image, or extending their product lines to feature phones and strengthening market segmentation to take the competition head-on, become important issues for these vendors.

Appendix

Research Scope

This research report analyzes the blurring boundaries between Smartphone and feature phone concepts and the reasons behind this development. Aspects of this development examined in this report include price range, software applications, and vendors' product strategies. Based on this analysis, the report looks at the impact of this development on the future of the mobile phone industry.

Product Definitions

Smartphone

Smartphones are handheld voice communications and data products that possess personal information management application programs and voice communications functions. These products feature open OS, such as Danger OS, Linux OS, Mac OS, Palm OS, Symbian OS, and Windows OS.

Feature Phone

Feature phones are cellular phones that adopt communications technologies such as GSM, GPRS, EDGE, WCDMA, TD-SCDMA, cdmaOne, cdma2000 1x, cdma2000 1x EV-DO. This product type does not include Smartphones with embedded OS and low-power mobile phones such as wireless phones and PHS (Personal Handyphone System).

Glossary of Terms

List of Companies