Cell Phones Becoming Profitless 498
saccade.com writes "EE Times has a fascinating article
on how electronics companies are being sucked into a profitless
spiral by the cell phone market. More and more of the small consumer
gadgets are being folded into the phone: camera, music player,
PDA, GPS, etc. So the market for non-phone gadgets is slowly
going away as the phone picks up more functions. However, consumers
don't buy most phones; they are given away (or sold very cheap)
by the service providers as hooks to get people to sign up for
mobile service. So the service providers are demanding (and getting)
rock-bottom prices for fancy phones they can give away, and the
micro chip companies are forced into brutal competition for a
market that is shrinking into a single commodity gadget, the
phone."
One for all... (Score:2, Interesting)
Crossing the Chasm (Score:5, Interesting)
In three years, I will bet anything that you will be able to connect a bluetooth mouse, keyboard and some sort of monitor to your cell phone (probably via it's charging cradle). For most users, these devices will be powerful enough to toss their PCs for good.
But to get there, the industry is running uphill at a breakneck rate - features and technology are going nutz - it is EXPENSIVE to make this transition.
Surely this has to change... (Score:2, Interesting)
boo hoo (Score:4, Interesting)
the micro chip companies are forced into brutal competition for a market that is shrinking into a single commodity gadget, the phone.
Free country, free market, free economy. If you don't like the heat- get out of the kitchen. Nobody's forcing you to sell low-margin products, and they have nobody to blame but themselves if they're only making stuff for cell phones. It's not like they woke up one morning and said "oh my gosh, someone changed our product lineup to be just stuff for cellphones!" Furthermore, I don't really believe it- plenty of semiconductor companies make stuff that has absolutely nothing to do with cell phones.
If it -is- true, who's to say this shakeup is a bad thing? That's the wonderful thing about a competitive market- if a company can't make a profit on a device, they won't make it. If there are too many companies making a widget, the price will go low and only the strong companies will survive.
The fantastic thing is that if the strong companies start to suck, well- a market forms for an competitor because there will be something to differentiate their product. Not only that, but if it's better- they can price it higher, and (gasp!) make more money!
Re:No, I did not read the article... (Score:5, Interesting)
My thoughts exactly. I did rtfa and I don't buy it. Much like the all-in-one printer/scanner/copier/phone/fax/kitchen sink devices out there, I'd much rather have a few gadgets which do their job excellently than one which does several jobs in a slip-shod manner. I don't like camera phones. They're slow and have horrible resolution. The PDA/phone hybrids are much too large to carry comfortably in my pocket. I'm completely happy with paying $150 for my small cell phone which gives excellent reception in most locations, a couple more hundred for my digital camera, and some more hundreds for my Neuros MP3 player. And, most of my friends feel the same way. Some day when miniaturization and overall quality of such products improves, then I'll reconsider.
Phones are profitable (Score:5, Interesting)
And in fact, that's what they do.
Of course, for tax purposes, it is best if they show on the books that they lose money. As we've seen in many industries (manufacturing, healthcare, defense, MLB, etc) it's rather easy to show enough loss to avoid paying taxes. It is fact that corporations (at least in the USA) pay many fewer taxes as they did 5 years ago. The primary reason? Tax avoidance through "magic" accounting techniques.
If there was no money in the business, the shareholders would put a stop to it - after all, most cell phone manufacturers make many other products. But amazingly, looking at the past 5 years, share prices remain fairly stable compared to the overall tech sector.
Universal Chip? (Score:3, Interesting)
The universal chip will be installed in every device then 'underclocked' so it only exposes the functionality that a consumer has paid for.
If it happens, it might make for some interesting hacks.
The customer is always right? (Score:2, Interesting)
Unfortunately, we might not have much choice. If the cell phone gadget market kills the other markets and then is squeezed itself by vanishing profit margins, then we'll all pay the price for getting "free" phones many times over. Unfortunately, short-term price always seems to trump long-term quality in commodity markets.
Re:No, I did not read the article... (Score:2, Interesting)
Re:We've seen this before in the PC card market (Score:4, Interesting)
In the case of a PC, the integrated motherboard costs less than the original motherboard, a sound card, and a network card.
In the case of a phone, the integrated PDA+phone is far more expensive than a much better PDA, and a phone.
If only this weren't true, I would be a happy, happy person right now, as I'm looking for a new phone and a new PDA, and am hating that I can't afford the combined systems.
Not really... (Score:2, Interesting)
Labelling (Score:5, Interesting)
Integration does have some benefits. (Score:3, Interesting)
I'm all for that, but since I also need a PDA, what do I do about the contact lists? Does the PDA have the definitive list, or does the phone have the definitive list?
Obviously the phone needs the list, otherwise you have no phone numbers to call. But if you only use the phone to enter all contact information, you're constrained to the tiny screen. And manually syncing the two every time one or the other gets new information is a horrible idea.
Since a PDA-sized phone is about as undesirable as a phone-sized PDA, I figure the only true way to solve this problem is to get the Bluetooth working so well that you can configure the phone to pull the list from the PDA if it can find it in its vicinity. That way, you only have to manage the list on the PDA, but the phone still has complete access to the list.
Phones are not making money? (Score:5, Interesting)
There's even one of those folding keyboards with bluetooth coming out that I'd love to buy next for it.
And if that's not enough, how about all the neat Symbian programs you can buy for it, like turning it into the ultimate universal remote control [psiloc.com]
And the camera in it feeds my addiction to mobog.com [mobog.com].
Anyhoo, sucker cost me $420. Someone made some coin on it.
I've owned a few PDAs including a Casio E100, E110, and a Dell Axim. Junk basically, and using imap or pop with pocket outlook is ultra painful. Too big and that resulted in me never carrying the thing. To get wireless internet access through the thing was another hassle.
This (nokia 6600 phone) puppy is just the right size for me.
Re:No, I did not read the article... (Score:3, Interesting)
-Take a photo with someone standing in front of a waterfall, such that the person and scenery are in focus, and the waterfall (and mist) blurred to illustrate the motion?,
-Pan to follow a runner at a local marathon (you're standing on the curb of the road) and shoot the runner so that most of the person is sharp, maybe arms and leg have some motion blur, and the background is out of focus and blurred to indicate direction of where runner is moving?
-Take a portrait picture where the person is isolated from the background? (narrow Depth-of-Field)
-Take an indoor flash photo where the lighting is even and natural (ie. not the "deer-caught-in-the-headlights" or black background behind person/object)
-1-3 second exposure to capture fireworks.
Cool! (Score:3, Interesting)
I hate multi-function phones (Score:4, Interesting)
I do not need a camera, voice memos, video games, downloadable polyphonic symphonic psychedelic ringtones, an MP3 player; barely functional text messaging, even more barely functional email, or a "web browser" that makes driving to the New York Public Library and looking up what I need to know seem efficient (I live in Virginia); Bluetooth, Compact Flash, color high-resolution display requiring exponents to describe, inaudible speaker phone, or a multi-billion dollar ad campaign that causes seizures in small children and house pets to tell me how this new phone is going to Change My Life Forever! (TM)
I do need good signal handling and audio; a phone book designed for people who actually a) read, and b) make phone calls; maybe a vibrating ringer available at every ring volume, not just the top and bottom; and a user interface that doesn't remind me of the very first freshman programming project of the year. For fancy occasions, an alarm clock can be nice.
A provider network that wasn't engineered by beauty-school dropouts would be nice, too, but that's another issue.
-Edgar
Not terribly surprising (Score:3, Interesting)
Right now Nextel actually is the only service provider I can see that really has a sustainable advantage of any kind in wireless. They've basically hooked the contractor market witht their "push to talk" feature. Yeah, other companies are trying to follow suit but Nextel already has the lions share of these customers who aren't likely to switch and they can charge more as a result.
Re:Phone upgrade addiction (Score:5, Interesting)
The problem really is created by the manufacturers as much as the providers. The phone has become a fashion item; for quite a lot of people, the phone you use tells others about who you are. Thus people tend to want to get a new phone very often, as fashions and designs change. That drives down prices a lot, as people can't afford to get a new, really expensive, phone every year, and on the other hand, the manufacturers dump the prices of their new models in order to make them the next must-have.
In a sense, it's the SIM card that defines their phone for people - that's the thing that holds their subscription, as well as address lists, phone numbers and so on. The phone hardware it currently sits in is just another fancy shell, to be discarded whenever the next model comes along.
Re:hardware as a loss leader (Score:3, Interesting)
Now phone companies are having a really hard time trying to flog off MMS phones, no one can see the point of buying a new phone so they can send 95 cent messages to each other.
As a side note it has also resulted in whats called a "Nokia salute" at teeniebopper concerts where cigarette lighters are not allowed. Just press enter on the phone and hold up the phone for the band to see.
Re:Maybe Gates was right... (Score:3, Interesting)
Its not software that will clkosed and expensive.. and its not hardware that will be expensive..
Its services..
Everything will be "service" based..
ISP's will merge (like they are already into the Cell phone, landline, Entertainment industry. Instead of signing up with 5 different companies for each "service" you will sign up with one... and they will supply everything).
Then after another 10 years of that.. the "Cyber punk" or "Neuromancer" type corporations will start to "buy" people... you won't apply for jobs, you'll be born into them.
mark my words.. this is how it will come to be.
Re:Crossing the Chasm (Score:5, Interesting)
The only earth shattering news about our cell phone market is that we continue to put up with hand-me-down technology from Japan and Europe and we also continue to pay way too much for it. The latest Samsung phone released here in the US has finally met the same standards as the NTT phone I bought 3 years ago in Japan...except it's $300 here and my phone back then only ran me 12,000yen (~$100). But if I sign up for a one year binding contract with T-Mobile, they'll discount it down to $200...woohoo.
The only reason why a mojority of handheld features are going into cell phones is because 95% of people don't NEED the full features of a handheld, and the small subset of features they do need (calendar, todo, adress book) are easy to implement in a cell phone. I consider myself a technology freak and I would never pay extra money for a cell phone that will open word documents because I have never been so damned busy that I couldn't wait to open it on a regular computer.
Re:Grrr... (Score:2, Interesting)
The phone "boot up" isn't just glitz and noise - the phone is actually doing something:
1. Initialise the SIM and read out important data;
2. Find a nearby tower and establish a connection;
3. Attempt to connect to the home network;
4. Wait for the network to send an authentication packet.
5. With the random number in the packet, use the encryption function in the SIM to authenticate the phone and subscriber identity as a valid user and send it back to the service provider;
6. Be granted access to the network.
This is for your protection; if not for the authentication, I could grab your IMEI and phone number using an over-the-air packet sniffer and spoof your phone. So, all my calls are billed to you
As for losing functionality as a phone, my Siemens C60 works at least as well as my original Nokia 100 AMPS phone - that's about as basic a phone as you could ever get!
Why I don't have a cell phone (Score:3, Interesting)
But I can't make sense out of these godawful service plans. I was going to get a phone a couple of weeks ago, but the madness of hidden charges, extra service charges and everything else that interferes in me figuring out HOW MUCH A MONTH, and comparing to other companies just made me lose interest.
I'm ready to pay for a phone and service, but I'm tired of the 'rebate economy' that cell phone providers hide behind.
When I can: pay the same, reasonable amount that isn't padded with unadvertised charges, and talk as long as I want, when I want - I'll get a phone.
Until then, phones are moot. Cameras, mp3 players, video games, internet access be damned - I'm not going to suddenly start paying to take pictures, listen to music, play games and surf 'per use'.
Yup. Very Cold Day in Very Hot Hell. But it's what I want.
My cell phone (Score:2, Interesting)
Ideas for Future Phones (Score:3, Interesting)
I thought about what else could be added into a phone some time ago and here is a list. Some of these features are already in some phones, but not all of them combined.
Tri-band GSM - So that the phone works in europe, australia and the US.
GPS - with maps so that you can use it like one of the purpose built devices.
Camera Phone - which uses GPS to add where the photo was taken to it.
MP3 Player
10-20Gb of Disk space using one of those tiny hard disks that have been developed.
802.11G wireless networking - allowing the user to link to thier mobile phone in there pocket. This would allow them to use it alot like the USB Memory keys now except without having to plug it in.
An Environment that can run programs that have been saved to the hard disk and use all the features of the phone (possibly java).
Easy Syncronization with outlook or some other calendar program. + Easy to expand syncronization technology for other purposes. eg Automatic backup of work files to home with each trip.
Bluetooth - to allow connection to various external devices like keyboards and the like.
A earphone the size of a hearing aid that links via bluetooth to the phone, that allows it to stay in you ear all the time.
A feature that would allow a signal to be transmitted to the phone to automatically put the phone in to silent mode. This would be good for cinemas and other public venues
color screen
good games - need I say more
Barcode reader and RFID scanner - so that you can do price comparision shopping + other industrial uses
Universial remote control.
Battery life exceeding 1-2 days, after which it doesn't forget all its settings like alot of the pda's do.
When I first started thinking about this, by using external components it would have costed about $10,000. Now I think it would be under half that, and still dropping. Thats if you could get a phone like that though!!!
Also the security implications of a device like the above would have to be well thought through.
Re:No, I did not read the article... (Score:3, Interesting)
Second, resolution. Consumer lenses are "softer" compared to pro lenses, which are much sharper. A pro lens can resolve a series of closely-spaced thin lines from farther away than a consumer lens can. Also, pro lenses are sharper through the entire frame, whereas consumers are often soft at the edges of the frame.
Less chromatic aberration. Less spherical aberration. Better contrast. Better coated glass, to reduce lens flare (when light from outside the photographed scene reflects off one of the inner components and into the picture). Faster and quiter focusing. Focusing turns rear elements rather than the front element, so that polarizing filters are easier to use.
Canon (and presumably others) has started putting image stabilization in higher-end lenses. Little gyros in the lens steady the image, letting you shoot in lower light. Not really an optics thing (they have it on some of their consumer lenses as well), but it's useful and is a several hundred dollar premium.
Etc etc etc.
Bulls**t (Score:1, Interesting)
Second, electronics manufacturers will get the cash one way or the other: the connection providers will pay the phone manufacturers which pay their subcontractors who made the necessary chips for, for example, the camera.
Third, at least here in Finland it's against the law to join phone and service: you are free to use whichever connection provider you want and whichever phone you want. And you are free to change the connection whenever you want. Ok, you have to pay the phone by yourself but it's yours to keep from the moment you bought it - the connection provider won't have anything to say about it.
Re:Crossing the Chasm (Score:1, Interesting)
Those phones were slightly better than what was cheaply available in the US at the time - but only slightly. Current US phones, even the cheap ones, are better.
Three years ago in Japan, everybody had very light phones with absolutely no features. Certainly current U.S. phones are a techonological step above those.
no, thank you. (Score:3, Interesting)
personally, i find these fancy phones rather distasteful. every month, some company comes out with a new cellular phone that has all these widgets and doo-dads and massive color screens...
but since what we've got now is basically a gunch of hand-held game systems with IM and SMS and all that stuff.... starting with Motorola's flip phones as a base, what i want out of a current cell phone (before i will consider buying one) is this:
* tri-band GSM. i don't want to be locked into one provider for each area i go to, or for each country i visit. i want the freedom to use my phone where i want, when i want, on whatever network is available, and pay one bill.
* standard web connectivity at no extra charge, with some basic web tools like SSH and a graphical browser (like Opera). (and by extension, it would need a good, low-power color display - OLED, maybe? not too big. and i say i want free web connectivity for one and only one reason: a WAP "hotspot" will not always be available. period.)
* consumer-ready, free, and open development kit. i don't want to pay $1,000 for a dev package that i might use once to develop a program i'd rather give away anyway.
and at this point, i'm reaching for more ideas. i don't want a phone that does absolutely everything. a phone should be just that. a phone. it should just work when i need it to work. it doesn't need to be burdained by all of these useless features i don't want anyway.
if i need PDA functions, i've got a PDA. if i need a high-end portable game system, i can get the Nintendo DS or something.
if i want to watch movies or listen to music, i'll just grab the PowerBook and go.
i don't need all this cruft in one package. i just want something that works, is wireless, and gives me the features i need, not the features i may want.
The cell phone is a utility for me, nothing more. (Score:3, Interesting)
I don't want my MP3 player, camera, and lord knows what, in my phone. It's too liable to be dropped, broken, lost, or stolen. With my expensive MP3 players and my expensive cameras, they stay in my pocket or bag 99% of the time. The phone is in my hand, in the dashboard holder, a lot more.
I'd just have a cheap phone with good battery life and easy menu system to store phone numbers. I don't need anything more then that.
And like one of the other guys mentioned above, the cameras in these things are crap anyways. Who cares if they are 3MP; the tiny optics prevent a great picture no matter how big the sample rate is.
Re:No, I did not read the article... (Score:4, Interesting)
What about sound quality? Why is it so bad now? (Score:5, Interesting)
Not really.. (Score:2, Interesting)
http://media.corporate-ir.net/media_files/NYS/NOK
It's clear that the margins are narrower than during previous years, but not profitless! Many other businesses aren't even dreaming of such numbers.
The low-cost manufacturers must be kept away with bringing constantly new features. Nokia has a flood of new models coming. We'll see if they lift the company to previous profit-level. Motorola is bringing 30 new models this year, but they have a longer way to top profits. Some manufacturers have been struggling with low profit for years, but for instance Samsung is doing well.
Re:No, I did not read the article... (Score:2, Interesting)
This is the main problem with camera phones as it is -- abberation and those sorts of fancy concepts don't really get a chance to come into play as they're pretty much pinhole cameras as it is.
Re:Labelling (Score:1, Interesting)
Antenna gain: Is in some sense standardised in modern systems (you actually care about the gain through the system and the signal to noise ratio, and sensitivity, but that's another question) so it isn't really such an interesting issue for the customer. How would you compare this from a WCDMA phone to a GSM phone???
Talk time & standby battery life: As fixed numbers, these are just a delusion anyway. They depend, almost more strongly, on the configuration of the network than on the phone (how many cells do they have, how close to eachother, how often do you do periodic locaation update, how often do you have to check for network in a blanks spot, what's the configuration of their network to phone signalling, are you staying still or moving, do you keep going in and out of coverage, are you on the edge of a location area and signalling to the network every time you move from room to room). How would you compare one manufacturer to another? It's useful on the manufacturer's own page to get a comparison between phones; it may be useful where an independent tester has used different phones on the same network in a similar way, but without a really clever standardised testing system it's pretty much useless between manufacturers.
But.. (Score:2, Interesting)