Hardware Commoditization In The Handset Market

Hardware Commoditization in the Handset Market

A tablet market report from Goldman Sachs states, “The OS platform wars could drive greater hardware commoditization over time. We believe that over time the more open platform vendors may have to impose standard hardware and user interface specs on handset and tablet OEMs to ensure that software developers have a uniform installed base.

This move to standardizatioEn would narrow the ability for hardware manufacturers to differentiate their technology over time and could result in hardware commoditization like that found in the traditional PC market.”
How the hardware market has changed over the years! There was a time when hardware engineers looked snootily at their software colleagues. Hardware held the key to the differentiating factor across the semiconductor landscape.

The tides have been shifting. With the gaining importance of software in the Mobile Internet Devices (MIDs), hardware’s role as a differentiating factor is indeed diminishing. And with that, so do the profit margins for the chip industry incumbents. This is especially evident in the feature phone handset market. So, how are the chipset players reacting to survive, if not thrive, in this evolving market?

Qualcomm shows an example. Early this year, in a plan to enable its shift away from today’s fragmented set of native mobile environments, the company announced that it will release over the next nine months a set of applications programming interfaces (APIs) geared to give Web-based applications deeper links into hardware. Qualcomm already supports Android, Blackberry, Windows Phone and WebOS mobile OS, among others. A move to Web-based applications would help it reduce the variety of platforms for which it needs to write software supporting its chips.

Qualcomm also has Binary Runtime Environment for Wireless (BREW), an application development platform created originally for CDMA mobile phones featuring third-party applications. The main advantage of BREW is that the application developers can easily port their applications among all BREW devices by providing a standardized set of APIs. It runs native code.

MediaTek has a similar strategy. After an almost meteoric rise in the handset biz. Thanks to the Shanzhai market, it saw its market share getting eroded by rivals following its own strategy. To combat and in charting its way up the value-chain, it also has created the MAUI Runtime Environment application development platform (MRE), which can download and run small applications for things like social networking, games and music—thus adding smartphone-like functionality to the feature’s phones. Over the recent period, it has partnered with the likes of Yahoo, Facebook, Opera software and several mobile value added service players to prep up its feature phones against the smartphones.

Web vs. native apps

As the mobile usage increases, both will grow with it and become valuable factors of product road maps. However, the question the product strategists need to ponder is, “What does my target audience need?” While the debate of Web vs. native apps is not new, it does throw some interesting options in this backdrop of looming hardware commoditization. One option is, the chipset vendors start conforming to the standard specifications set by the open platform vendors. The hardware is strongly connected to the OS platform and with a proliferation of various mobile OS in the market, it is not an easy task supporting them all or even hedging on a few. Not enticing.

But what if a chipset vendor were to make inroads into Web apps and get a deep link between Web apps and its native hardware through some popular browsers? It can potentially get some interesting revenues by tapping the right Web apps based on their target market. And remember that Web apps is an open platform—no waiting, no approval. Its success is hinged on its adoption by the user community.

Having said that, the speed comparison (of compiled vs. interpreted code/Web vs. native) will be there as well as cases, especially until the near future, where native wins over Web, but companies are working on those too (Qualcomm has been working for two years to optimize software so that browsers run as fast as possible on its chips). What has happened to desktop applications can also happen to native mobile apps.

Hmm…This may be one escape route from the commoditization problem.