Five Trends That Will Shape the Mobile Industry in 2011

The stable consumer price points and increasing sales volumes of the mobile device market are attracting competitors. Increasing competition has resulted in greater use of patent assertion by incumbents to protect markets and create new revenues streams. New market entrants and those trying to enter new markets, like Apple, HTC and Microsoft, have already faced patent challenges from established players like Nokia and Motorola. Many OEMs have also faced challenges from non-practicing entities looking for royalties. With counter-suit following lawsuit, the situation is already messy.

It is made even more volatile as product convergence (smart phones and tablets incorporating new functionality like imaging, GPS, etc.) creates unlimited licensing opportunities. Today, literally thousands of patents apply to various aspects of smartphones representing the convergence of a number of consumer electronics and semiconductor domains. It should be no surprise that patent holders are seeking compensation for use of their intellectual property in such a lucrative market.

In response, we are seeing more recent entrants into the smart phone arena, such as Apple and Microsoft, accelerating their patent filing rates and purchasing patent portfolios to strengthen their positions. In recent years HTC has joined patent pool RPX, struck a licensing deal with Intellectual Ventures (IV) and has actively acquired companies and patents to strengthen its defensive IP position. In fact, recent HTC litigation is based almost entirely around patents acquired in this way. As well, Chinese telecom equipment leaders Huawei and ZTE have joined Google, Apple, Motorola, RIM and Nokia in pursuit of Nortel’s attractive LTE patent portfolio in an attempt to ready themselves for the next wave of wireless technology. There is no doubt about it. The smart phone wars aren’t just about applications, processors and operating systems. The underlying IP is the new battleground.

China is in the midst of an innovation revolution when it comes to portable mobile technologies. Known for years as low-cost manufacturers of foreign designs, and suppliers to a flourishing market for “knock-off” products, Chinese companies have shifted from emulation to innovation. Since 2001, when just 42% of wireless patent filings in China were filed by Chinese inventors, domestic innovation in this space has accelerated dramatically. By 2008, almost 70% of wireless patent filings in China were domestic inventions, representing a five-fold increase in filing volume. Over the same period, the number of cellphone patents filed by Chinese inventors in the US more than tripled.

Building on the expertise learned as manufacturers, Chinese companies such as Huawei and ZTE are evolving to serve the increasingly sophisticated needs of the local market. As more sophisticated middle class Chinese consumers express their preference for genuine global smart phone brands rather than local copies, Chinese companies are now turning their sights on global markets with products that are highly competitive in price and performance. Taking advantage of the Android operating system, China handset vendors are accelerating the time to commoditization for new smart phone technologies, placing heavy competitive pressure on traditional mobile handset innovators. UBM TechInsights has charted the increasing sophistication of Chinese mobile handset technology since 2002 and has revealed the latest advancements in its China Handset Research Initiative.

Using UBM TechInsights product profile database built from over 1000 product teardowns of consumer electronic devices and smart phones, we have traced the technology lifecycle of consumer electronics innovations in products like digital cameras, personal media players and GPS units as they converge with smart phones. Now, the core elements of many personal medical devices are increasingly found in smart phones including: processors, displays, memory, keyboard/data-entry methods, battery power, connectivity methods (physical/wireless), speaker/headphones and sensors (imaging, audio microphone, IR sensors, motion detection, etc.). Driven by apps, video and gaming, smart phones have also become more sophisticated with greater processing power and better sensors. This creates opportunities for electronics designers to deliver valuable medical device functionality at a lower marginal cost through integration with smart phones. Lower prices to consumers who already possess smart phones increase the addressable market for integrated products as compared to more expensive stand-alone medical devices.

Smart phone implementations also come with the advantage of being conveniently at hand and ready for use at all times and usually at a significantly lower cost to the consumer. Over time, medical technology innovations improve the precision and reliability of implementations on smart phones so they rival or, when combined with apps, even surpass stand alone devices. The question for traditional medical device companies is whether their designers, marketers and IP staff have factored the smart phone platform into their thinking. Smart phones provide medical technology companies unprecedented access to an enormous consumer market. To capture this opportunity, they must think carefully about how they develop new technologies and protect their intellectual property innovations. Otherwise, they face the same fate as makers of stand-alone GPS units and MP3 players – a slow decline to obsolescence.

Over the past 10 years, UBM TechInsights has tracked the evolution of cellular phone and smart phone technology, through hundreds of detailed product teardowns. With the emergence of the tablet market, UBM TechInsights is at the forefront of technical analysis with expert tablet teardown reports that reveal integrated circuit (IC) content and design wins, system architecture, as well as system and sub-assembly metrics for a growing list of tablet products. Apple’s iPad has set the pace with market dominance in 2010. But serious challengers are appearing fueled by consumer and enterprise interest as well as the introduction of devices based on Google’s Android and other operating systems, including new products from key vendors in China such as Huawei, Aigopad, Gome and SmartQ.

The emergence of video applications enabled by 4G bandwidth, and the rise of computing-intensive gaming applications, has driven rapid innovations in wireless, processor, memory, display, and battery technologies, as well as advances in packaging techniques. The pace of technology advancement and consolidation in the tablet market will outstrip even that experienced in the smartphone market. Despite the proliferation of tablet products at this stage of this growing market, given Apple’s commanding early lead and the momentum behind Android-based systems (which UBM TechInsights predicts will commoditize hardware), new entrants to market that are not taking advantage of standard chipsets (like NVIDIA Tegra and Samsung Orion processors) and operating systems will find themselves unable to keep up with the pace of product evolution. This will present challenges for major vendors like Nokia and RIM who appear to be taking their own paths.

UBM TechInsights has performed in-depth technical analysis of the latest state-of-the-art processors, wireless and memory devices used in leading mobile products and continues to see semiconductor manufacturers rising to the challenge of mobile applications. Mobile product designers will continue to lever advances in semiconductor technology to address the challenges faced in balancing performance, cost, power consumption and form-factor in the latest smart phone designs. On-chip integration of processors and wireless functionality will dramatically reduce required area, while advances in semiconductor processes will yield not only smaller devices, but lower power consumption and higher performance. As dual core processors and next generation mobile operating systems make their appearance in the next wave of smart phones and tablets, performance differences between products will depend more heavily on high speed memory interfaces. These trends are illustrated in UBM TechInsights’ forensic technical analyses of such devices as:

• Samsung Galaxy Tab 
• Qualcomm MSM7230 Snapdragon Mobile Processor 
• Broadcom BCM4329 low-power 802.11n, Bluetooth, and FM transceiver 
• Elpida LPDDR2 Mobile SDRAM