Weekly Wrap: The Market Burns Hot
By Carlo Longino, Fri Sep 03 08:15:00 GMT 2004

Handset sales set a second-quarter record, Japanese device makers look to increase their market share by moving into China, Ericsson pulls its Bluetooth, and more.

Research firm Gartner released its second-quarter handset sales figures this week, with the overall news solid and something good for each of the top vendors to latch onto. But Gartner raises the concern that the market is on the verge of overheating, as strong sales in new markets fuel growth, and any slowdown or hiccup potentially causing a buildup in inventory. Manufacturers, though, hope to ward off any such problems by pushing upgrades in mature markets.

Booming sales in emerging markets like Latin America boosted the figures, and Japanese device makers are turning their eyes to another such market, China, in an attempt to boost their own fortunes. Japanese companies like Sharp, NEC and Panasonic are hoping their expertise in developing 3G handsets will help them get a leg up as China prepares to transition to the new networks. The companies get 20%-30% of their sales from overseas, but hope to boost that to 50% in the next few years.

While technological innovation is quickly brought to emerging markets, carriers are realizing they must also force innovation in their business models and strategies. Flilpino operator Smart has seen its subscriber numbers increase and its costs fall, simply by lowering its minimum prepay refill amount by two-thirds, and using electronic refills instead of scratch cards. Other carriers in Asia are adopting the practice, as refill minimums were often too high for low-income users.

Voice over Wi-Fi has gotten a lot of attention lately, as carriers and handset makers look to capitalize on the buzz surrounding VOIP and offer business users a way to cut costs. But the special equipment needed by the converged products offered so far, and the devices' half-hearted uses of Wi-Fi, have some wondering what's the big deal. Carriers offering the services are taking steps to limit access to networks that would eat into their revenues, and the cost savings are questionable when companies must buy proprietary equipment to support the new devices.

However, several carriers, handset manufacturers and network infrastructure makers announced this week the Unlicensed Mobile Access spec, designed to extend cellular services over IP-connected wireless technologies, such as Wi-Fi or Bluetooth, and make handoffs between the two types of networks seamless and more simple.

The wireless spec flavor-of-the-month is still WiMAX, but some developers are noticing the standard's complexity and wondering if it will be possible for WiMAX to do everything, and do it as well as it's supposed to.

Just when Bluetooth, the most maligned of standards, is reaching widespread public acceptance, its inventor, Ericsson, is taking a step back from the technology. The company said this week it would stop developing Bluetooth chips, and while some might interpret it as the company abandoning the standard it came up with, it really signals that Bluetooth has become mainstream enough that Ericsson is happy to let others take over the high-volume, low-margin production of chips.

The cavalcade of standards continues, as Samsung said this week it would buy Near Field Communications chips from Philips and use them in forthcoming handsets. NFC is very similar to Sony's FeliCa contactless IC chips in use in Japan, and serve similar functions -- mobile wallets, identification and access, and so on.

There have been plenty of stories of repressive governments banning cameraphones, but reports emerged this week alleging that Chinese authorities were telling mainlanders to tell family members in Hong Kong to vote for pro-Beijing candidates in upcoming elections, then snap pictures with their phones to provide proof. But it's not all oppression and intimidation for cameraphones: a number of film festivals dedicated to the small, small screen of mobile devices are making news.

Elsewhere on the site this week, Mark Frauenfelder looks at how wireless technology is going places it's never gone before, and David Pescovitz shares how enthusiastically Bluetooth is being embraced by one group of users.