Abstract

Microsoft's Smartphone Strategy

In Western Europe, the mobile phone market has already reached maturity. Operators are no longer focusing on attracting new subscribers; rather, they are focusing on subscriber retention, raising ARPU (Average Revenue per User), developing their own, tailored mobile integrated data services, and launching operator branded handsets to break the monopoly held by the leading handset vendors. This situation provides Microsoft with a marvelous opportunity for breaking into the handset market.  

Microsoft already has experience in providing a comprehensive set of software development tools for the PC platform. The company's move into the handset market is based on the company's .NET Solution strategy, whereby Microsoft will be collaborating both with carriers and Taiwanese ODMs. For operators, Microsoft will be offering carriers the Mobile Information Server; for manufacturers, the company will be providing operating systems for handheld devices. Microsoft's participation will be limited to the provision of operating systems; the company will not actually be involved in handset production or marketing. 

The Taiwanese players that have been developing Smartphone and Wireless PDAs include both handset makers and IT hardware manufacturers. BenQ, Compal-C, and Lite-On typify the former type; the latter include HTC and Mitac. In the short term, these manufacturers will have to deal with the instability of the Microsoft OS and the complexity of the collaborative model. Additionally the high price points hinder economies of scale, making procurement for key components such as color LCM (Liquid Crystal Display Module) difficult. In the long term, however, collaborating with Microsoft and with carriers will help Taiwanese manufacturers to improve industrial design, mechanical design and software design capabilities. 

 A Tide of Platforms Rolling In

In concert with the rise of Samsung, LG, Asian handset contract manufacturers, and Chinese branded makers, development of 2.5G/3G systems has become increasingly complex. Baseband suppliers such as TI, Agere, and Philips, handset vendors such as Motorola and Ericsson, and leading PC chip supplier Intel have thus successively provided total software/hardware handset platform solutions. 

Competition between handset platforms is becoming increasingly fierce, and handset baseband and RF chip suppliers have been seeking to establish alliances of complementary strengths and maintain competitive advantage in the future. For example, Agere, which has an advantage in baseband, has been collaborating with RF suppliers Hitachi and Silicon Labs on the development of a new platform. In the case of the Ericsson Mobile Platform, which possesses communications design capability, has formed a strategic alliance with Philips, which has semiconductor production process capabilities, to jointly develop 2.5G/3G RF ASICs, baseband ASICs, power amplifiers, and PMU (Power Management Units). Intel, whose area of special expertise is application processors, has collaborated with RF suppliers ADI and RFMD to develop the Manitoba Platform. 

Price competition among handset platforms has lowered the entry barriers for handset production. In the future, Taiwanese ODMs will no longer be playing the role of system designer; instead, they will be focusing on industrial design, MMI (Man-Machine Interface) and API (Application Program Interface). However, Taiwanese ODMs with a superior R&D capability have been developing their own modularized platform architectures. Not only will this reduce the level of risk in future production, the use of common architecture will help to build up the R&D capability of the Taiwanese manufacturers' Chinese production facilities and facilitate the development of wireless PDAs and Smartphones.