[Venture capitalist Richard Wong reports from CTIA 2007 - Orlando Florida]
Just a short few years ago, the wireless industry used to be largely influenced (or controlled some might say), by the wireless MENS club. That is to say, Motorola, Ericsson, Nokia and Siemens (MENS), largely European vendors, were the dominant players in mobile handsets, and in providing the underlying network infrastructure.
The wireless world is shifting (if the recent troubles at Motorola and Siemens weren’t enough of a wake-up call). As you stand here at the bi-annual US wireless conference, CTIA, you will see some unfamiliar new names flexing their muscles.
What’s striking is to see the major presence of Korean and Chinese brands such as Samsung, LG, Huawei, ZTE (among others). And there are a new breed of Chinese players such as HTC, Quanta, TCL/Alcatel coming right behind them.
For example, recent announcements this past month from these new players have included:
• HTC, a leader in the smartphone devices just today at CTIA in Orlando, HTC announced a hybrid “shift” device (see image above) that is a blend of a traditional phone and a mini-laptop, with a slider QWERTY keyboard integrated with a “traditional” bar phone.
• LG, a relative newcomer to US mobile handsets just 7 years ago, recently announced it has taken the #2 market share spot in mobile handsets in the US, with a 17.2% share in Q3 2006.
• Huawei is gaining momentum in UMTS (3G networks) with 28 network wins in 2006 (purportedly the leader of UMTS network wins in 2006). Obviously, this puts major pressure on Nortel, Ercisson and Lucent-Alcatel across all their network deals.
• ZTE, has announced 3G handset deals with major players Telefonica in Spain, and is building 3G handsets for Vodafone in the UK.
A short 7 years ago, these companies were NOBODIES on the wireless stage, but now they are striving for leadership positions.
There will be fierce competition and continued price pressure as these players from Japan, Korea, and China grow. The historical MENS club incumbents will fight back hard, and a number of these key players (Nokia in particular) will leverage their own assets, multi-product platforms, and manufacturing experience to stave off the price pressure. BUT increasingly, many of us in this wireless and mobile industry will be spending time in Seoul, Taipei, Beijing (and yes…maybe even Ningbo) to find the next big ideas, as well as build relationships with this important part of the ecosystem.
For those interested in driving forward the next generation of mobile applications, this increased competition is goodness. Players like Sharp, LG and Samsung helped accelerate growth of photo-phones, color phone, and music phones into the US and Europe marketplaces. If your company has historically been focused only “in-region” in the US or Europe, it’s a worthwhile investment to reach out to these new Asian players.
Update: See clarification in comment below for why the MENS Club was challenged.
5 Comments
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David G. said:
Richard, why did incumbents like MENS lose market shares to these relatively new players? In wireless industry, which force: commoditization or innovation, plays a large role in shaping the competitive landscape more in the last few years? How about future and in what ways? THX.
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Richard Wong said:
Hi, in response to your question…
First, since Japan/Korea had been very advanced in mobile-data and advanced handsets (color, miniaturization, cameraphones, etc), many of these new asian players had jumped ahead on new features for the mobile data world. So, when consumers and mobile operator were looking at their mobile data strategies in 2002, many of them found these devices to be more advanced than the “MENS club” phones of that era.
Second, just as occurred in the PC-era in the mid-90s, many of the Asian players are extending their manufacturing experience in other areas of consumer electronics into the phone space. So, as new markets such as India and Latin America accelerate, many are looking for the simple/low-cost phones that many of these new entrants can provide.
To your question of competition going forward – it’s a combination of innovation and cost management as you might expect. Of all the former MENS club, Nokia is one of the few that still stands on top, and capturing market share by executing on both strategies - a combination of continued innovation on device type, and improving the UI of the mobile experience, as well as a low cost, high scale manufacturing platform strategy.
Sincerely
Rich Wong -
Paul F said:
In the past the MENS group have wielded some power through control of IP and cross-licensing, especially in the GSM space. Is this now changing?
Regards Paul
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Richard Wong said:
Yes, that’s been true historically. Another approach that’s been used is also interoperability testing only with select members of the club, which is effectively another form of cross-licensing.
That said, a number of changes have occurred. First the existence of organizations such as 3GPP http://www.3gpp.org/, and OMA (open mobile alliance) http://www.openmobilealliance.org/, have begun to level the playing field by estalishing open standards and test interop environments.
Second, the operators have begun to grow in market power through market consolidation. Companies such as Telefonica, Vodafone Global, as well as even here in the US such as Sprint/Nextel, ATT/Cingular, have increased their negotiating power with the MENS club.
Lastly, the company with the most interesting IPR strategy is actually NOT a historical MENS club member, Qualcomm… who has very broad IPR in 3G and CDMA technologies.
Sincerely
Rich Wong -
Richard Wong said:
As another example of the trend, Philips Eletronics today, announced the completion of sale of their mobile handsets business to China Electronics Corp (CEC)
While Philips was never a major player in the “MENS” club, they were once an important 2nd tier player in Europe…
