The prospects are ominous for Android handset manufacturers - although those for Android, the platform, are good. That's according to the analysis by PRTM, a management consultancy. The analysis is interesting: here's what it says.
PRTM benchmarked 57 Android-based hand- sets from 12 companies, looking at the formal Android release date, the launch date of the phone, and the chipset platform.
Its conclusion: Android is indeed a game changer. Here are three of the research highlights, which we've reproduced here:
• "The average cycle time for handsets first sold in 2008 based on Qualcomm's QSD8250 chipset and Android's Donut 1.6 release was a brief 8 months. By late 2009, the average cycle time for handsets based on Qualcomm's MSM7227 chipset and Android's Eclair 2.1 release had nearly halved, down to 4.5 months. This is "warp speed" for complex smartphones."
• "Next, Android has removed speed as a source of advantage. In the past, vendors who got to market quickly could gain six to nine months of highly profitable advantage. But now vendor cycle times are virtually identical – they can all deliver handsets based on the latest Android release within 16–20 weeks."
• "Third, most of the handsets – 77% of the sample – are based on Qualcomm chipsets. Seasoned observers may find this ominous. Over the years, Microsoft and Intel have captured far more value than the makers of the PCs. Will "Quadroid" become the new Wintel?"
Taken together, PRTM says, "these three findings have significant implications".
Which they say are as follows. "In 2007, Android did indeed look like an easy, inexpensive way to challenge the extraordinary success of Apple and its iOS-iPhone-iTunes combination. But the success of the venture has unleashed a tiger. And, three years on, the [Android] handset companies are starting to look like its lunch."
PRTM's prediction on what could happen next:
• "The levelling of the time to market playing field, the rush of new market entrants, and the emergence of "Quadroid" as the dominant offering will drive down gross margins for handset companies to dramatic new lows – close to the 8–10% range endured by major PC manufacturers like Acer or Lenovo. Some handset companies may not survive."
They say: "Handset developers must urgently seek new sources of differentiation to offset the huge pressure on margins. Their search will need to consider their industrial designs, user experience, the richness of available applications, and new business models. In short, they'll need to act more like Apple while staying different from Apple.
"Handset vendors that do not want to be entirely subordinated to Google will have to decide which other operating systems could be their best dual-source alternative. Margin pressure means fewer development platforms, but, taken too far, may result in unbalanced supply with equally unattractive implications for margin.
"Consumer demand will become more volatile. Faced with many similar products based on the same core technologies, fashion and viral enthusiasms will drive volume highs for successful products. Meanwhile good- but-not-great products will languish, calling for exceptional agility in vendors' manufacturing and supply chains.
"Ultimately, as businesses reconsider their operational strategies, they should know that staying neutral is not an option. Tough choices are required and they'll need to decide if Android is truly a vendor's friend or foe."
It's interesting how closely this ties in with the analysis by Asymco's Horace Dedlu which suggests that "integrated" mobile vendors - Apple, Nokia, RIM – "captured" $3.83bn of profits from the smartphone market, while "modular" (which includes Windows Mobile and Android, but mostly Android) got $0.59bn.
And in another post - entitled "What do you have to believe for an Android dominated future?" - he points out that in smartphones, "integrated" (Nokia, Apple, RIM) is not losing out in share terms to "modular" (Android, WinMo, "other"):
"Even though the overall market grew, the share of the market held by modular architectures is smaller than that for inter-dependent. It's also not increasing. In 2008 modular players held 36%, in late 2010, they held 35%."
What's the upshot? A very cloudy picture for Android handset makers - even while the picture for Android is rosy, I think. The possibility that Qualcomm and Android will become the Wintel of smartphones - though possibly not with such a dominant monopoly looks interestingly likely.
One thing that doesn't look likely: that the smartphone market will be dominated by any one OS in the way that the PC market has. The reason: mobile carriers. They don't want to be cut out, and it's in their interest to have different OSs fighting it out, because they will push down the prices of handsets, while also giving them a range of products across the price range ("want a snazzy phone with a high price? Step right this way to our gold-encrusted iPhone 7! Or how about the diamond-encrusted BlackBerry?"). There's no equivalent to the mobile carriers in the PC business - which is why it's going to be so different.
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