Detecon Opinion Paper Key To The Wireless Future: The Quest For The Ideal Mobile Device

> Opinion Paper
Key to the wireless future

The quest for the ideal mobile device
2008 / 03
www.detecon.com
Key to the wireless future - the quest for the ideal mobile device
Table of Contents
1 Executive Summary ............................................................................................ 3
2 Understanding the market for mobile devices ..................................................... 4
3 Key trends in the mobile device industry............................................................. 7
3.1 User-driven trends....................................................................................... 7
3.2 Services and Applications ........................................................................... 9
3.3 Device features ......................................................................................... 10
3.4 User Interface............................................................................................ 11
3.5 Device Technology.................................................................................... 12
3.5.1 Computing Platform: Operating System and Microprocessor ................... 12
3.5.2 Communication platform: base-band and radio-frequency chipsets ......... 15
4 Conclusion ........................................................................................................ 17
5 Recommendations ............................................................................................ 18
6 The Authors....................................................................................................... 19
7 The Company.................................................................................................... 20
Opinion Paper 2 Detecon International GmbH

1 Executive Summary
Mobile devices are at the core of current developments in the wireless industry. With voice
and simple data revenues from SMS having reached their zenith in many markets, the future
of wireless services is evolving around customer lifestyles, mobile Internet, entertainment
services and location-based services. For all these, feature-filled and well-designed mobile
devices are a critical success factor.
This creates a number of challenges - both on the technology and the market side - for all
players in the industry. The mobile devices ecosystem has become highly complex,
encompassing everything from lifestyle brands, to Internet-centric media and entertainment
services, cameras and GPS receivers, industry-standard operating systems, highly-
advanced computing platforms and a myriad of communication technologies.
Drawing on many years of industry experience and world-wide client engagements,

Detecon’s Center of Excellence for Global Technology Intelligence has performed an
extensive analysis of the industry. To better understand the industry and derive
recommendations for managers both in marketing and technology functions, we have
developed a four-layer framework that elucidates the industry structure and points to key
battle grounds within the industry.
We see the industry at a critical inflection point and believe five areas will decide the future
path of most players: understanding the globalization of demand, leveraging brand equity,
delivering attractive services with a strong focus on usability, dealing the fast-paced device
technology evolution, and maneuvering between open and closed approaches for the
industry ecosystem and underlying technology architecture.
To succeed in this highly-dynamic environment, service providers, network operators, device

manufacturers and technology and component providers must excel at three things:
mastering the explosion of product and technology variants; keeping continuous vigilance on
market and technology trends and potentially disruptive developments; and achieving a
sustainable position in the industry by developing and executing a vertical competition
strategy.

2 Understanding the market for mobile devices
Can there be such a thing as an ideal mobile device in the future?
Common notion might lead to the conclusion that there probably will be one available soon,
integrating all currently available features and services into one candy bar or clamshell
mobile. From a buyer’s perspective, the major trend in mobile handsets is feature
convergence. Everything seems to be converging into one mobile device exhibiting all
conceivable features and services, such as cameras, music playback, Internet browsing,
GPS navigation, multi-band capabilities and many more.
However, if one looks very closely at what is happening in the market, the number of
available variants from the major mobile phone manufacturers has multiplied significantly in
the last few years (see figure 1). Special purpose devices for mobile gaming, mobile
messaging or mobile web surfing add even more variants to the market. How can this
seeming paradox be reconciled? Mobile phone operators are already having a hard time
tracking these developments and selecting the handsets that will sell in conjunction with their
service contracts. What challenges do new mobile phone portfolios pose for players in the
markets? This Detecon Opinion Paper analyzes the market and guides towards possible
answers.
Figure 1: Increasing number of mobile phone variants

232
LG 193
Motorola 179
Nokia 163
Samsung
139 141
Sony Ericsson
122 124
105
99
86
77
66 65 64 66
59 57
53
43 42 38 42 45 43
36 37 35
28 30 28
21 22 23
17 17
11
3 1 3
2000 2001 2002 2003 2004 2005 2006 2007
Source: Informa Telecoms & Media, Detecon analysis
Almost every person in the developed world already owns and carries at least one mobile
handset. Penetration rates have risen to more than 100% in several developed countries.
Sometimes the mobile phone even seems to be more important to users than other personal
belongings like keys or a wallet. Just ask anyone who has forgotten or lost their mobile
phone.

Being a critical part of personal life, mobile handsets reflect a growing desire for owners to
express themselves, first by selecting the brand and model of the handset but also through
personalization of the device itself with ringtones, screensavers, wallpapers, colorful cases,
etc. A closer analysis reveals that preferences vary considerably around the globe: from
region to region and from person to person. One would – of course – expect that the needs
in developing countries differ from those in countries with already high mobile penetration but
we also find huge differences between countries with similar market acceptance of mobile
communications. How then, can stakeholders in the mobile device business respond to a
booming global market that is home to both rapid technological innovation and disparate
user needs, without having to be all things to all people?
To discern the fast-paced trends taking place, Detecon has developed a layered framework,
exhibited in figure 2, which facilitates a detailed description of current developments in the
mobile handset industry. By identifying the relevant influences on each of these layers we
arrive at an understanding of the key driving factors and interdependences between the
layers.
Figure 2: Detecon Mobile Device Framework
Layer Description/Examples
Q Influenced by lifestyle, income, cultural preferences,

User Trends socio-economic groups
and Needs Q Old vs. young
Q Business vs. consumer
Q Voice/SMS/MMS Q Mobile TV
Services and
Applications Q E-Mail Q Ring tones
Q Navigation Service Q Mobile Internet
Q User interface Q Camera

Hardware-related
Device Features Q Display Q Memory
Q Design & Brand Q GPS receiver
Q Operating System (OS): Symbian, Windows

Core Device Mobile, Linux
Technology
Platforms Q Microprocessor (µP)
Q Base band/radio frequency chipsets
Source: Detecon
At the top, user needs are driving the market. Nowadays these needs are largely related to
personal lifestyle but also vary based on income, cultural preferences, world geography and
by the affiliation with socioeconomic groups, especially within youth culture. These needs
have to be supported by the services and applications that are offered by the handset. In
turn, services and applications require certain hardware-related features in the devices.
A navigation service, e.g., typically requires an integrated GPS receiver.

Adding more and more services and features to each new generation of mobile handsets
adds complexity. This has to be addressed by the design of the user interface. Usability can
be the main driver for the market success of a new device as discussed in chapter 3.4.
At the core of any modern mobile device are its computing platform, consisting of a
microprocessor (µP) and a related operating system (OS), as well as the base band (BB)
and radio-frequency (RF) chipsets required for wireless connectivity. Sensing the strategic
importance of the computing platform from historic success of the Windows/Intel (“Wintel”)
platform in the PC industry, this area is currently under strong consolidation pressure. At the
same time, an explosion of new communication technologies such as WiFi, WiMax, HSPA,
UMB and LTE plus the availability of new frequency bands is creating strong industry
dynamics. Chapter 3 will take an individual look at the main trends within each layer before
we are able to draw overarching conclusions in chapter 4.

3 Key trends in the mobile device industry
To fully understand the implications of the trends briefly described above, it is necessary to
take a closer look at key developments on each single layer. For a stakeholder in the mobile
phone business – whether a service provider, a handset manufacturer or a software
company – this will help draw the conclusions necessary to making the right decisions on the
future of their own business.
3.1 User-driven trends
Mobile devices have evolved from being a business tool to now being a widely accepted
personal device that is always with us, both for business and private use. Of course this has
not happened in all markets in the same way or at the same time. Within the markets with
high device penetration, the mobile phone has become absolutely critical to the life of
customers. Most people probably will not leave the house without their keys, wallet and
mobile phone. Phones are customized with ringtones, wallpapers, screensavers, stickers,
key chains, colorful cases, leather wallets, and many other items. The mobile device reflects
its owner’s personality at least as much as the selection of a brand, type and color of a car.
Similar to the automotive industry where each limousine, hatchback, station wagon, coupe,
convertible, SUV, and pickup is built to suit the preferences of the customers, the mobile
phone industry has developed several form factors to meet its user needs. Typically one can
distinguish between clamshell, monobloc (or candybar) and slider styles as the main types of
mobile devices. The preferences differ widely around the world with the cultural context as
can be seen in figure 3.
Figure 3: Mobile phone form factors
Form Factor Distribution 2006 Form Factor Distribution 2010 (expected)

Other 3% 4% 4% 3% 2% Other 6% 7% 7% 6%
Slider 4%
5% 6% 10%
Slider 11% 12% 10%
26%
30%
43% 36%
35%
45%
Clamshell 74%
Clamshell 76%
69%
60%
47% 46% 49%
38%
Monobloc 20%
Monobloc 7%
North Western Asia/ Rest of North Western Asia/ Rest of

America Europe Pacific World* America Europe Pacific World*
* Rest of World: Central and Latin America, Central and Eastern Europe, Middle East and Africa
Source: Strategy Analytics
Clamshell is by far the best selling form factor for mobile phones in North America (74% in
2006) whereas every where else monobloc styling is the most preferred (only 43% in
clamshell phones in Asia Pacific and 30% in Western Europe). As user trends evolve, form
factor preferences are also expected to shift.

What do users want to do be doing with their stylish devices? What is the common
denominator a mobile phone manufacturer or service provider can count on? Of course the
basic needs have not changed much over the last few years: low cost and simple-to-use
voice- and SMS-centric phones mark the lower end of the market. Devices designed for
elderly people typically are based on this. They include large and easy to use keyboards and
displays which only show what necessary in large characters. Beyond these basic needs,
current devices need to support all types of activities and preferences of today’s mobile
lifestyles: listening to music, taking and sharing photos, instant messaging, surfing the web,
gaming, tracking children, and many more, including business requirements such as instant
access to e-mails and contacts and secure access to enterprise data and applications.
As features abound, branding has become a more important criterion. As buying the right
brand is a fashion and lifestyle statement, co-branding with powerful luxury labels has
become popular in the mobile phone industry with the introduction of the designer cell
phones from Prada, Armani, Bang&Olufsen, Porsche Design and other global design and
fashion companies. Their success also demonstrates that the original equipment
manufacturer sometimes does not really matter. Prada, the Italian fashion house, for
example has selected LG of Korea as the technical partner while Bang&Olufsen relies on
Samsung technology, and the Porsche Design phone is powered by Sagem. None of these
OEMs are able to command the hefty price premium of the designer brand.
Unforeseen highly-specialized applications have also sprung up. In many developing

countries money transfers via the mobile phone services have become an alternative to
other remittance services. Users who may not even have a bank account can transfer money
or accept payments. Mobile banking has proved important in developing countries where a
robust financial infrastructure is still being created. Similar service offerings in the Western
world, like Paybox, have not universally flourished but have currently found niche uses in
certain markets.
Figure 4: Net subscriber additions by regions 2007 - 2010
Africa/Middle East
19%
Western Europe 6%
52% Emerging Asia

North America 5%
12%
Latin America
4%
2%
Central and Eastern Europe
Developed Asia
Source: Pyramid Research

By the end of 2010, nearly three-quarters (74 percent) of the world’s 4.2 billion mobile
subscriptions will be in emerging markets. Over the period 2007-2010, roughly 87 percent of
the expected 1.4 billion net subscriber additions will occur in developing regions. Emerging
Asia will lead the way with 52 percent of all net additions, followed by MEA at 19 percent and
Latin America at 12 percent (see figure 4).
To some extent, this trend will be driven by the fact that these markets have poorer land-line
infrastructures causing many consumers to jump straight to mobile devices. Even if such
markets remain dominated by lower-end, voice-centric users, their burgeoning numbers
alone will make them venues of key interest for vendors and suppliers, with larger potential
sales volumes for low-end devices – at least for the next few generations. Instrumental to
Nokia’s phenomenal success in 2007 – realizing a market share of 40%, bigger than the
added market share of the following three competitors – has been focusing on simple
devices for emerging markets. Similarly, Sony Ericsson reported an increase in market share
by 2 percentage points as a result of increased attention to customers in emerging markets
in 2007.
3.2 Services and Applications
Voice and SMS, the dominant mobile applications of the ‘90s, are still the most popular
mobile services today. Yet, handsets nowadays offer a large number of installed non-voice
applications and also act as a platform for services delivered by network providers:
multimedia and instant messaging, e-mail, mobile TV, music and ringtone downloads,
Internet access, GPS navigation and many more.
Beyond the general adoption of mobile Internet browsing, the hype around Web 2.0 is
expected to create a strong push for mobile services like Twitter, YouTube Mobile or Yahoo!
Go 3.0. Device manufacturers and operators are already offering integrated applications that
not only support media consumption but also content production. Sony Ericsson for example
makes it easy to upload content to weblogs and podcasts. Vodafone customers in the UK
can upload pictures and videos directly to their Facebook, YouTube, MySpace and Bebo
account direct from specific Nokia or Sony Ericsson handsets. “MyFaves” customers of T-
Mobile can easily share pictures and messages. We expect that mobile Internet and mobile
Web 2.0 of media sharing, content generation and social networking will be a significant
trend for the future.
As this development is still unfolding, it remains to be seen how deep the integration of the
online service into both the network and the device will need to be in order to be successful.
This will be a crucial factor in determining the relative power of device manufacturers,
network operators and Internet service providers. Experiences from the past show, that there
is no single path to success. The iMode Service – very successful in Japan – did not thrive in
the European market where it was introduced by KPN. Early attempts to build WAP-based
mobile portals by Vodafone (Vodafone Live!) and T-Mobile (t-zones) also did not live up to
expectations. The customers were not satisfied with the portal offerings in the providers’
“walled garden.” On the other hand, the RIM Blackberry push email service, which consists
of a deeply integrated application on the device and a matching Internet service, has
become perhaps the most successful mobile Internet service to date. Apple’s iPhone has
followed a similar path. Under the brand name “Ovi,” Nokia is investing heavily in web-based
services such as navigation, gaming and music downloads for integration into their cell
phones. Additional services such as online dating have already been announced as “Ovi”
has become an integrated feature on Nokia’s future phone offerings. This strategy might
bring the company into potential conflict with some of its major customers, which are offering
similar services of their own.

Many of the services mentioned above increase the spectrum of mobile phone usage, thus
bringing new revenues to operators and service providers alike. Other services such as
mobile VoIP and Instant Messaging have sometimes been seen as a threat to existing voice
and messaging revenues. An early reflex of some mobile operators therefore was to ban
these services on their networks. However, recent success stories question this strategy.
Swisscom, as well as German service provider Debitel, are successfully selling IXI’s OGO
mobile messaging device which integrates email and instant messaging for a flat monthly
fee. Similarly, China Mobile has launched an IM service called “Fetion” (pronounced:
“Fashion”) that integrates mobile instant messaging as well as PC-based participants. With
currently 50 million users (2007) the service has proved to be successful. Fetion includes
free PC-to-phone messaging and voice conferences for up to 8 participants. It’s key feature
is ensuring that the user is “always on-line”. In the UK, network provider “3” has just
launched a tariff that includes free VoIP/Skype calls via UMTS data connections. “3” not only
explicitly allows the use of Skype but also supports it by providing a handset that integrates
Skype software and a direct access button prominently displayed next to the keypad. It also
uses Skype prominently in marketing.
As these examples demonstrate, the market for mobile services and applications has
strongly grown in variety and richness and continues to exhibit very strong dynamics. It has
become a central battleground of the industry, pitting network operators, device
manufactures and service providers at times against each other and at times in successful
collaborations. Markets such as Korea and Japan are already giving us a glimpse at the next
level of application evolution: handsets there are already being used for “wave-and-pay”
wireless payment, online gaming, broadcast TV or household automation.
3.3 Device features
Size, weight, battery life, screen color and multi-band capabilities were once the main
differentiators of mobile phones. This has changed drastically within the last few years. The
number of available hardware-related features of currently available mobile handsets has
grown with an astonishing rate, including: integrated picture and video cameras, music
players, GPS Navigation, FM Radio, Bluetooth and Wi-Fi compatibility and even broadcast
TV receivers (DVB-H, DMB).
We expect the continuation of fierce competition on technical differentiators, e.g. the size,
resolution and color depth of the display, the capacity of the integrated storage, or the photo
resolution of the integrated camera, even though the willingness to pay for the device
remains unchanged. High device subsidies in many markets have brought down the
perceived value of any mobile device to “almost free”. Given the physical limitations of
handheld devices, embedding features on a mobile phone will always involve trade-offs,
such as battery life versus multi-standard capabilities. While consumers often equate “more
features” with a better device, the constraints mentioned above necessarily prevent
manufacturers from becoming all things to all people, as much as they might like to try.
Beyond physical limitations, there is also the issue of usability, since the result can be an
overwhelmingly complex device (see next chapter).

Figure 5: Mobile phone feature evolution
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Display – 4096 colours
Display – 65k colours
Display – 262k colours
Integrated Camera
Expandable Memory
Bluetooth
WLAN
Broadcast TV
< 10% 10-50% > 50%
Source: Informa Telecom & Media
Nevertheless the feature war will continue. By 2011, research company Informa expects,
that well over 50 percent of all handsets will include a 65k color display and expandable
memory, as well as MMS and video capabilities; in addition, most of them will be Bluetooth-
and Java-enabled. Only up to half of those devices sold, however, will handle e-mail and
have Wi-Fi connectivity. In addition, up to 10 percent will be able to receive broadcast TV
(see figure 5).
3.4 User Interface
With more and more features and applications being integrated into the mobile device the
user interface has become a key factor with this development.
Although softkeys and graphical menus are standard on most mobile handsets, the
proliferation of options and their increased complexity has created devices that are so
complicated to use that they are practically unusable. Remote setup and configuration can
help eliminate incomprehensible configuration menus. But the main challenge, being able to
interact with all features, applications and services a device offers in an intuitive and
satisfying way, needs to be addressed with improvements of the user interface.
Industry focus on the user interface has received a strong stimulus from Apple’s success
with the iPhone. Apple has taken a different approach to usability by focusing solely on
touchscreen-control of the device (except for a single button remaining). By integrating multi-
touch capabilities, Apple was able to add gesture-control functionalities. This has been
perceived as a significant improvement over most previous touchscreen implementations
that rely mostly on single-touch functionality.
Other vendors have taken up the challenge. Taiwan’s HTC adds a new user interface called
“TouchFLO” on top of Microsoft’s Windows Mobile operating system for its “Touch” product
line. Many press reviews and analysts view have seen HTC’s development primary as a
marketing and eye-candy move, since most use scenarios force the user to interact with the
original windows look and feel buried beneath the sleek “Touch” interface. Nonetheless, it is
also seen as a step in the right direction and can be seen to act as a wake up call for
Microsoft to rethink their mobile device interface design.

Even the world leader in mobile phones - Nokia - makes moves to redefine their user
interface strategy: While remaining the major stakeholder in Symbian Software, Nokia
recently acquired Trolltech which focuses on integrated application platforms for Linux based
mobile phones. Trolltech has begun integrating F-Origin’s IRIS touch screen, gesturing and
motion-control technology into its Qtopia mobile device platform. It is not clear yet whether
Nokia’s own advanced user interface developments, which are based on Symbian, will
become obsolete or whether the acquisition of Trolltech was just a move to keep competitors
out of the playing field.
While it seems that touchscreen user interfaces seem to be a major trend now, they also
have their drawbacks and limitations. The maximum typing speed is limited by the capability
of the touchscreen and the satisying mechanical feedback of a conventional keyboard is
missing. With touchscreens, a lot of user interactions also make it necessary to use both
hands and therefore impose limits on the device usage.
Leaving the current touchscreen hype aside, current user interfaces of mobile devices are
influenced largely by the three separate paradigms: the classic telephone with its original
number keypad that has already evolved into a simplified alphanumeric keypad via, e.g. T9
technology; consumer electronics devices, where turning knobs and pushing buttons are
dominant to change volumes and select album tracks; and, of course the standard “WIMP”
(Windows, Icons, Menus and Pointing Devices) user interface of the desktop PC and the
Internet. As none of the historic paradigms is best suited for all types of applications, we
expect a new breed of interfaces that combine selected attributes of these known interfaces
with new ones which are unique to mobile devices. Motion control – where movements of the
mobile phone (e.g. tilting) act as a part of the interaction – is an example. Future interface
will also include tight interaction with the mobile Internet and other services, leveraging
location-data, calendar-data, and other information to improve contextual capability and
improve mobile device usage.
The user interface is where the entire chain of mobile networks, services and devices meet
the end user. We expect the UI to be another key battleground for the industry, where again
both network operators, device manufactures plus application and service providers will want
to create commitment by creating interfaces that are easy and fun to use.
3.5 Device Technology
3.5.1 Computing Platform: Operating System and Microprocessor
Unlike in the PC market there is no single dominant operating system in the mobile device
market – at least not yet. Early GSM phones relied largely on simple proprietary operating
systems developed by the phone manufacturers. Simple devices for developing markets still
do, while high-end smart phones are using fully-fledged operating such as Symbian,
Windows Mobile, Palm OS or Mobile Linux.

When Microsoft entered the market targeting first handheld (a.k.a. PDAs) and later mobile
devices, many industry observers expected that it would quickly gain the status as the
dominant player for operating systems much like in the PC market. Although strong
consolidation is under way, the Nokia-dominated Symbian continues to be the worldwide
market leader. PalmOS is losing ground while Blackberry OS has carved out a significant
niche. Apple’s OS X and Linux have strong future potential (see figure 6).
Figure 6: Smart phone operating system market share
2% 5%
16% 8% 5%
Symbian
21% 1%
31% MSFT
13% 2%
RIM
49%
Palm
2% Linux
7% 84%
Apple 46%
8%
North America (NA) Western Europe (WE)
Global
3%
Global/Regional Market Share of OS in Smart Phones Year 2007 17% 2%
34%
Global WE NA APAC RoW
Symbian 49% 84% 5% 34% 78%
MSFT 8% 8% 21% 1% 17% 64% 1%
RIM 7% 5% 46% 0% 0% 1%
78%
Palm 2% 1% 13% 1% 3%
Linux 31% 0% 0% 64% 2%
Apple 2% 2% 16% 0% 0%
Asia Pacific (APAC) Rest of the World (RoW)
Source: Strategy Analytics
In Asia/Pacific Linux based smartphones are already leading the market. The upcoming
Android system promoted by the Mobile Handset Alliance (a consortium under the lead of
Google) is a software stack for mobile devices also based on Linux. With its recent
acquisition of Trolltech (see above), Nokia might also be thinking about enlarging its options
– at least for a part of its product range.
Many device manufacturers are using several operating systems in their portfolio. Motorola,
which recently got into trouble by not being able to catch up with a successor to its Razr V3
product, is known to offer phones based on Symbian, Windows Mobile, Linux and its own
proprietary environment.
Given the current strength of each of the operating systems, we do not expect strong
consolidation onto one major platform to take place in the foreseeable future. This will
continue to create challenges for application developers and service providers as they have
to accommodate multiple platforms and test for compatibility. Most people draw the lesson
from the history of the PC industry that the operating system constitutes a strategic industry
control point which they are reluctant to see in the hands of one player. This is where
industry alliances such as the Open Handset Alliance (better known for Google’s Android
initiative) or the LiMo Foundation try to overcome the deadlock. The development of the
operating system landscape will be another area where the future of the mobile industry will
be shaped.

On the microprocessor side, just like in the PC world, which is dominated by the x86
architecture, most mobile phones are based on the so-called ARM architecture, which is
claimed to have a market share of more than 80%. However, unlike the PC world, where
there are only two major manufacturers, Intel and AMD, with Intel being by far the dominant
one, there are currently many makers of microprocessors for mobile devices. These include
TI, NXP, ST, Marvell, Qualcomm and AMD. These all license intellectual property from AMD
for the core of their system designs.
The latest developments of the leading mobile device chipmakers are all focusing on
computing and graphics power. With special graphics processor functionality – e.g. the AMD
Imageon – high-end mobile devices are already faster when it comes to 3D-graphics or high
resolution video playback than a standard PC five years ago. Quite recently, graphics
specialist Nvidia announced their entry into the mobile market.
With its Ultra Mobile PC and Mobile Internet Device (MID) initiatives, PC market leader Intel
keeps pushing into this market as well. Coming from a strong roadmap of multiple core
solutions for pure desktop power machines (in the sense of the word) and migrating to low
power consumption solutions adapted to the mobile computing device environment these
solutions and their evolutions will be also compatible with a pure mobile device environment.
The key behind the considerable power-saving capabilities at the same or even higher speed
is Intel’s enhanced 45 nm technology. Chipset platforms like Montevina and Menlow will
appear in early versions in 2008 and include powerful microprocessor cores and already
include a selection of wireless base band (mainly modem and MAC) technologies starting
with Wi-Fi and Mobile WiMAX (IEEE 802.16e).
The high fragmentation of the market at the µP-manufacturer level indicates that no
dominant design has emerged yet. The development in the PC world proved that the
standardization of microprocessors and surrounding hardware will alter a technology market
significantly. Device manufacturers such as Dell, HP, Lenovo and Acer have found
themselves in a very competitive market, and many of them have been struggling with profit
levels while platform makers Intel and Microsoft thrived. Manufacturers of mobiles device
might also be marginalized by one OS and one µP vendors if a single dominant design were
to emerge. Thus we expect to see only slow consolidation at the µP and OS level driven by
need to utilize economies of scale to bring down costs and speed up development but
hampered by vertical competition strategies.

3.5.2 Communication platform: base-band and radio-frequency chipsets
Base band (BB) and radio frequency (RF) chipsets are the core parts of any mobile device
whether it is a basic model or multimedia loaded smart phone. While the RF component acts
as a radio transmitter via the connected antenna, the attached base band processor
encodes and decodes according to the standard used by the device and network, e.g. GSM
or UMTS. In the early days of the wireless industry adding multi-band capabilities – e.g. for
the GSM bands of 900 MHz, 1800 MHz and 1900 MHz was sufficient and could be
implemented relatively easy from a technological perspective.
Currently we are experiencing a multiplication of transmission standards and variants, like

GSM, UMTS, HSDPA/HSUPA, EDGE, LTE, WiMAX, WiBro, Wi-Fi (most of them with
generation-specific subsets) and TD-SDCMA (the Chinese home grown standard for 3G)
and component makers struggle to implement these within their chipsets.
Figure 7: Examples of mobile device chipsets
GSM/GPRS Chipset
Intel WiMAX connection 2250
Overall Chipset Solutions WiMAX Chipset Multimedia Chipset
Source: Texas Instruments, Intel
Many players, such as for example COMSYS Ltd., are looking for assemblies addressing the
classical (narrowband) cellular technologies with their existing infrastructures and adding a
broadband wireless MAN (Metro Area Network, i.e. WiMAX/IEEE 802.16) or PAN (Personal
Area Network, i.e. Wi-Fi/IEEE 802.11) component. Such solutions aim to be compatible with
GSM, GPRS, EDGE and WiMAX air interfaces simultaneously. As such a solution has to
support a high number of modulation formats (BPSK, GMSK, QPSK, 8-PSK, 16 QAM, 64
QAM) the design of an associated base band processor is highly complex. Compared to
existing approaches supporting 2G, 2.5G and 3G (3GPP) in one BB chipset, the problem is
hidden behind the higher RF linearity requirements for OFDMA (WiMAX). Another challenge
will be to combine legacy, i.e. TDM, and NGN capabilities (IP based) in a single unit without
deteriorating size and power consumption. In this highly dynamic environment we see niche
players, such as COMSYS competing against much larger industry giants such as Intel.

Despite the tremendous progress that can be observed in the microprocessor and base
devices, the RF part still remains the biggest challenge. This is mainly determined by the
need for RF chipsets covering multiple bands from around 400 MHz up to 2500 MHz
including the high linearity requirements for modulation formats supporting very high
spectrum efficiencies. Providing solutions that are optimized for individual bands will not be a
feasible strategy on the long run. The problem even increases if the full potential of today’s
technology is applied: As we discussed in an earlier article1 MIMO (multiple in multiple out)
solutions are able to dramatically improve coverage and capacity simultaneously in certain
environments. This requires the integration of multiple receivers, transmitters and antennas
into a single compact device and consequently pushes the boundaries further.
Nevertheless, even such complex device architectures are no longer out of reach: MIMO
technology has recently been successfully introduced in early versions into WLAN’s (IEEE
802.11 pre-n standards) at commodity prices, the step towards integration into the classical
mobile device seems to be in reach. As in the baseband area, corresponding innovative
technologies are backed by another semiconductor giant: IBM. Using IBM’s new “CMOS
7RF SOI” technology, single-chip low-power consumption radios with excellent performance
and much higher complexity will emerge quickly. The higher levels of complexity can be
favorably used to either enhance performance (e.g. by implementing powerful algorithms for
adaptive pre-distortion and linearity improvement) and/or to integrate additional functions
(switches, filters, bias circuits etc.) that required separate components up to now.
The long-term vision for the communications chipsets is what is called “software defined
radio”. Here a generic piece of hardware, much like today’s PC could be used to emulate
any current or future communication standard – simply by using software instead of hard
wiring. With this dream coming true a single technological platform could be used anywhere
in the world and could be easily adjusted to any network changes or new standards
implemented. So a device maker will be able to offer a true “world phone” then.
1
Hans-Peter Petry, Wolfgang Knospe; “Mobile Broadband Networks - What's Next?
Technical and Commercial Prospects of Future Wireless Technologies “ in DMR (2007)

4 Conclusion
Mobile devices are at the center of current developments in the wireless industry. With voice
and simple data revenues from SMS having reached a zenith in many markets, the future of
wireless services is evolving around customer lifestyles, mobile Internet, entertainment
services and location-based services. For all these to find success, mobile devices are
critical.
This creates a number of challenges - both on the technology and the market side - for all
players in the industry. From a technology perspective, there is a discernable trend towards
more standardization, although on none of the layers of the Detecon framework neither a
single dominant player nor a group of players has emerged yet.
The frequently-cited parallel to the PC industry can prove valuable guidance. However, since
the stakes are so large for all players involved, we do not believe that the mobile device
industry will follow the exactly same path as the PC industry did more than 20 years ago.
Rather we expect to see the evolution of a very complex industry centered on a number of
key questions:
• Brand equity: Will the traditional brands of the mobile industry carry enough
momentum to sustain their customer relationship or will players from other
industries, such as Internet services, media, or consumer electronics, gain traction in
a market dominated by convergence?
• Globalization of demand: The wireless industry is the first high-tech industry that is
not threatened by what has been called “the digital divide”. On the contrary,
emerging markets are expected to dominate mid-term development across the
industry. How can players be successful on a global scale, effectively understanding
and meeting regional demands in a highly competitive marketplace?
• Attractive, usable services: What is the best approach to deliver exciting remote
services onto handheld devices? Who will create the user interface paradigm of the
21st century’s wireless world?
• Open vs. closed approaches: Will the advantages of standardized platforms and
open approaches, such as economies of scale, variety of choice and safeguarding of
investments, outweigh those of closed approaches, like end-to-end quality, time-to-
market and customer lock-in?
• Fast-paced technology evolution: Continued exponential technology advance is

pressuring time-to-market, confusing consumers with more features, creating
challenges for product portfolio strategies, straining both R&D and marketing
resources and increasing the complexity of the whole value chain. What
organizational approaches can players in the industry develop to remain competitive
in the market?

5 Recommendations
For stakeholders in the mobile phone business, answering these questions and finding the
right approach to the dynamic mobile market is of utmost strategic importance. Service
providers, network operators, device manufacturers, and component and technology
providers all need to find ways to match the global diversity of user needs and preferences in
an effective and cost-efficient way with the plethora of technology choices. Industry decision-
makers should focus their efforts on three activities:
• Mastering the explosion of variants. The industry is well on its way to require strong
elements of mass customization and modular production along most of its value
chain. Looking at best-practice strategies and examples from other industries will
yield insights towards finding success in the mobile arena. All players should
develop very robust portfolio management capabilities that are highly effective at
matching market demand with production efficiency. This will entail carefully
selecting the right platform approaches, building modularized production systems
with careful variant planning and coping with the complexity effects of the increased
number of versions.
• Continuous vigilance of trends and potentially disruptive developments.

Understanding and integrating user-driven service innovation is not only relevant to
service providers and network operators but also to handset and component
manufacturers to be prepared for the requirements of an Internet-centric mobile
future. Similarly, understanding the implications of quickly-changing technology
developments is not only mandatory for technology players but also for brand-driven
and customer-centric service providers and device vendors.
• A vertical competition strategy. In this complex ecosystem, no player will - in our

opinion - be able to achieve long-lasting market success by itself. Continuous co-
operation and competition will be the norm as the future of the global mobile device
market unfolds. All players therefore need to have a clear picture of their own vital
interests and understand the strategic objectives of their peers, partners and
competitors. As a strategy aimed at pure market dominance is likely to fail, finding
partners and defining their minimum economic interest is necessary for long-term
success.

6 The Authors
This Opinion Paper was written by Detecon’s Center of Excellence on Global

Technology Intelligence - a worldwide network of highly motivated consultants combining a
deep-rooted understanding of global and regional telecom market trends with world-class
technology competencies. The Center of Excellence provides Detecon’s clients with direct
access to latest technology and market trends from the most dynamic world regions.
Dr. Volker Rieger leads the Global Technology Intelligence Center of Excellence. He is also
head of the Technology Portfolio Strategy competence group at Detecon’s Bonn
headquarters. He has more than ten years of professional experience in the information and
communication industry focusing on business and innovation strategies.
He can be reached at: +49 228 700 1920 or volker.rieger@detecon.com
Dr. Hans-Peter Petry is a Managing Partner of Detecon and directs the group Radio Access
and Transport. His outstanding experience in the field of wireless technologies and their
applications is coupled with many years of management experience in the vendor industry,
where he has held various positions in research & development, product management, and
business development.
Burin Itsarachai is a Consultant with Detecon Asia-Pacific, Ltd., in Bangkok, Thailand, with
more than ten years of international experience in the telecom industry. The focus of his
work has been on technology and business strategy for next-generation system
architectures and networks.
Riadh Marrakchi is a Senior Consultant in the Radio Access and Transport group. He has
more than five years of experience in the mobile industry supporting operators in
procurement and service optimization of latest-generation mobile networks, turnaround and
technology strategies, and implementation.
Hiten Parmar is a Consultant with Detecon, Inc. in the Silicon Valley, San Mateo, California,
U.S.A. His area of expertise is telecom product and services trends in the North American
market with a particular focus on wireless data services and mobile market analysis.
Marco Röder is a Consultant in the Technology Portfolio Strategy group. He has on

numerous occasions led large international teams performing strategic analyses of global
telecom and vendor markets for global clients.
Qin Weijie is a Senior Consultant with Detecon Consulting Co., Ltd. in Beijing, China. He
has almost ten years of experience in the Chinese telecom market. His consulting focus is
on strategic and marketing topics for Chinese operators.

7 The Company
Detecon International GmbH
Detecon International is a leading worldwide company for integrated management and

technology consulting founded in 2002 from the merger of consulting firms DETECON and
Diebold. Based on its comprehensive expertise in information and communication
technology (ICT), Detecon provides consulting services to customers from all key industries.
The company's focus is on the development of new business models, optimization of
existing strategies and increase of corporate efficiency through strategy, organization and
process improvements. This combined with Detecon's exceptional technological expertise
enables us to provide consulting services along our customers' entire value-added chain..
The industry know-how of our consultants and the knowledge we have gained from
successful management and ICT projects in over 100 countries forms the foundation of our
services. Detecon is a subsidiary of T-Systems, the business customers brand of Deutsche
Telekom.
Integrated Management and Technology Competence
We possess an excellent capability to translate our technological expertise and

comprehensive industry and procedural knowledge into concrete strategies and solutions.
From analysis to design and implementation, we use integrated, systematic and customer-
oriented consulting approaches. These entail, among other things, the evaluation of core
competencies, modular design of services, value-oriented client management and the
development of efficient structures in order to be able to distinguish oneself on the market
with innovative products. All of this makes companies in the global era more flexible and
faster – at lower costs.
Detecon offers both horizontal services that are oriented towards all industries and can entail
architecture, marketing or purchasing strategies, for example, as well as vertical consulting
services that presuppose extensive industry knowledge. Detecon's particular strength in the
ICT industry is documented by numerous domestic and international projects for
telecommunications providers, mobile operators and regulatory authorities that focused on
the development of networks and markets, evaluation of technologies and standards or
support during the merger and acquisition process.
Detecon International GmbH

Oberkasselerstr. 2
53227 Bonn
Telefon: +49 228 700 0
E-Mail: info@detecon.com
Internet: www.detecon.com

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> Opinion Paper

Key to the wireless future

Opinion Paper 2 Detecon International GmbH

Drawing on many years of industry experience and world-wide client engagements,

To succeed in this highly-dynamic environment, service providers, network operators, device

Opinion Paper 3 Detecon International GmbH

2 Understanding the market for mobile devices

Can there be such a thing as an ideal mobile device in the future?

Figure 1: Increasing number of mobile phone variants

2000 2001 2002 2003 2004 2005 2006 2007

Source: Informa Telecoms & Media, Detecon analysis

Opinion Paper 4 Detecon International GmbH

Figure 2: Detecon Mobile Device Framework

Q Influenced by lifestyle, income, cultural preferences,

Q User interface Q Camera

Q Operating System (OS): Symbian, Windows

Opinion Paper 5 Detecon International GmbH

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3 Key trends in the mobile device industry

3.1 User-driven trends

Figure 3: Mobile phone form factors

Form Factor Distribution 2006 Form Factor Distribution 2010 (expected)

North Western Asia/ Rest of North Western Asia/ Rest of

Source: Strategy Analytics

Opinion Paper 7 Detecon International GmbH

Unforeseen highly-specialized applications have also sprung up. In many developing

Figure 4: Net subscriber additions by regions 2007 - 2010

52% Emerging Asia

Source: Pyramid Research

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3.2 Services and Applications

Opinion Paper 9 Detecon International GmbH

3.3 Device features

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Figure 5: Mobile phone feature evolution

Display – 4096 colours

Display – 65k colours

Display – 262k colours

< 10% 10-50% > 50%

Source: Informa Telecom & Media

3.4 User Interface

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3.5 Device Technology

3.5.1 Computing Platform: Operating System and Microprocessor

Opinion Paper 12 Detecon International GmbH

Figure 6: Smart phone operating system market share

Source: Strategy Analytics

Opinion Paper 13 Detecon International GmbH

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3.5.2 Communication platform: base-band and radio-frequency chipsets

Currently we are experiencing a multiplication of transmission standards and variants, like

Figure 7: Examples of mobile device chipsets

Intel WiMAX connection 2250

Overall Chipset Solutions WiMAX Chipset Multimedia Chipset

Source: Texas Instruments, Intel

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• Fast-paced technology evolution: Continued exponential technology advance is

Opinion Paper 17 Detecon International GmbH

• Continuous vigilance of trends and potentially disruptive developments.

• A vertical competition strategy. In this complex ecosystem, no player will - in our

Opinion Paper 18 Detecon International GmbH

This Opinion Paper was written by Detecon’s Center of Excellence on Global