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June 1, 2010

On average, since smartphones were introduced almost three years ago, they have been sold with a higher profit margin by wireless handset manufacturers, but higher profit margins probably won’t last forever.

Some wireless industry observers think that the smartphone segment will soon be looked upon as a commodity before the year is over.

Somehow, a parallel can be drawn with the personal computer industry over the past twenty years to see how the smartphone market will carry on for the next few years. With the exception of Apple, the whole personal computer industry moved from proprietary (read Microsoft Windows) high-margin machines to inexpensive PC hardware as most of the component parts became available at low prices and from off-shore makers in Taiwan, South Korea and China.

And then came Dell. The Texas-based company completely transformed the entire PC industry with a direct-to-consumer business model that essentially just assembled component parts, with an Internet-based front end to directly serve the customer. All of a sudden, consumers and even businesses were able to have a new PC built to their exact specs and that would meet their very specific needs.

As you probably know by now, personal computers today are no-longer ordered from warehouses stocked with older and mostly obsolete machines. Like Dell, PCs are now built to order with the most current parts and customer demand is reflected in real time by the orders coming in.

Now today’s wireless handset manufacturing industry looks pretty much like it did when it began in 1990, with engineering teams grouped by product line and charged with developing new mobile handsets. The development cycle typically takes about one to one-and-a-half year and lags customer trends in both functionality and fashion.

The PC industry changed to a commodity business and so will the mobile handset industry before the year is over.

By 2012, some say we will see mostly miniature computer-like smartphones but that will all be standardized with proprietary designs fulfilling demand in niche market segments.

Most of the internal workings of a modern PC today reside on what is called the motherboard, which is typically a commodity component purchased from an outside supplier, and that is 98 percent of the time located off-shore. Azus is one perfect example.

Now the mobile industry can purchase a smartphone motherboard with all functionality baked onto the circuit board, including tested and certified 3G technology, Wi-MAX / Wi-Fi, Bluetooth functionality, some sensors and necessary IO (input-output) connectors for peripherals like LCD displays, keys, cameras, speakers and microphones-- just like any PC.

Additionally, today’s smartphone motherboards can run real computer chips. There is no reason not to have full PC capabilities built—in a form factor that fits in your pocket.

Since the OS and hardware is integrated into systemware and miniaturized and highly optimized, current battery technology can power an x86 smartphone motherboard and 3 or 4-inch screens for several days if used normally.

Because these smartphone motherboards are already pre-tested and fully certified to work on any standard 3G wireless network with today's modern carriers, mobile handset makers use these as standard platforms around which they can add customized hardware casings and software UIs (user interfaces) to bring great smartphones to market very quickly, and at an unbeatable price, just like PCs today.

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Source: KBE.