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Analysis: iPhone opens door for cellphone revolution

Posted: 13 Aug 2008 ?? ?Print Version ?Bookmark and Share

Keywords:cellphone market? open-source platform? iPhone? Android?

A year a ago next month, Sun Microsystems co-founder Andy Bechtolsheim was holding court after a panel discussion at the AlwaysOn Stanford Summit and showed a s small group around him how to navigate the Net on his new Apple iPhone.

"Finally," Bechtolsheim proclaimed, "someone has delivered a cellphone with a compelling experience of the Web."

As is often the case, Bechtolsheim was right. I have owned three cellphones that offered Internet access, but after sorting through the 14 clicks to get to "mobile optimized" CNN feeds on their tiny screens, I gave up on mobile surfing.

Just as it did earlier in personal computing, Apple Inc. took ideas pioneered elsewhere and brought them alive in the iPhone in a way no one had to date, using unassuming off-the-shelf hardware and a stunningly simple and fun user interface. And once again, Apple created a marketing firestorm that captured the imagination of the public as well as astute technology watchers like Bechtolsheim.

In the past 18 months, the Apple effect has rocked the industry. Last November, Google announced it would launch its own cellphone software, dubbed Androida similarly compelling mobile Web environment from another industry darling. The kicker: It will be available as free open-source code.

Late last month, Nokia weighed in. The world's largest cellphone maker (it shipped an estimated 437 million phones in 2007) is buying Symbian in an effort to create a unified OS that includes Nokia's own S60 user interface and elements of software platforms developed by the likes of Japan's Docomo, Sony Ericsson and Motorola. It too will be made available as free open-source code.

"It's crazy," said Scott Rockfeld, a mobile-group product manager at Microsoft Corp., speaking of the twists and turns of the past year and a half. "We've reached an inflection point and everyone is jumping in," he said, quickly noting that Microsoft is something of an incumbent here, having sold some 35 million licenses to Windows Mobile since its release about seven years ago.

Indeed, the proverbial knee to the curve appears to be dead ahead. International Data Corp. (IDC) estimates 10 percent of the nearly 1.2 billion handsets that will ship this year will be Web-ready smart phones, a slice IDC predicts will grow to 30 percent by 2011.

"All cellphones will be smart phones eventually," Jeff Hawkins, inventor of the Palm Pilot and Treo, told me the last two times I interviewed him. "If you've been in this industry a while, you can see this will happen," he said, referring to the trickle-down techonomics of Moore's Law.

Now that Apple has crystallized the concept of the Web-ready phone, the question is how this mobile platform will evolve in today's hypercompetitive environment.

Macintosh way
Clearly, Steve Jobs will play out the old Macintosh strategy againin spades. This time he is not only insisting on owning the software and the system; he also wants to own the services the iPhone uses and the retail shops where it is sold. And, according to a quote in The New York Times, Jobs plans to make many of the chips the device runs on, tapping the low-power processor expertise he acquired with PA Semiconductor in April.

In a move that straddles daring and hubris, Jobs will pit PA Semi's topnotch CPU team against the Texas Instruments and Qualcomms of the worldcompanies whose chips the first-generation iPhones spurned in favor of devices from second-tier players such as Infineon, Samsung and TriQuint.

A flaw in a single multimillion-dollar mask etching could sideline a major product launch for six months or morean entire product cycle in the mobile world. The fact that Jobs is willing to take on those risksand costsis all the more unexpected given that the company required no special silicon to set the cellular industry on its ear with its first two iPhone generations.

Possible silicon snafus aside, Apple should do very well, thanks to its excellent software design, product sense and expanding crowd of followers. But it will be limited by the number of devices and relationships one companyhowever rapidly growingcan manage.

Already, Samsung has filled a hole in the market for CDMA-based carriers with its iPhone-like Instinct handset for Sprint. Despite its similar look and feel, the Instinct is not an iClone, insists Muzibul Khan, VP of product management and engineering at Samsung Telecom America.

While the iPhone is all about easy access to Apple's services, the Samsung phone leads users to Sprint's. "We believe we have done a far rarer task of collaborating with a carrier, and we hope to continue this," said Khan.

Interestingly, the $130 phone uses a proprietary OS and set of application programming interfaces, called simply the Samsung Handheld Platform, that the South Korean giant has used many times before.

Apple's future
Still, Apple has plenty of room for growth. Will Strauss of market watcher Forward Concepts said it could easily become one of the top 10 handset makers within a year, a distinction that requires sales of only 10 million units annually.

But scroll ahead to, say, 2012. Apple will be struggling to roll out a product portfolio that matches the breadth of Android and Windows Mobile systems on the market. As with the Macintosh during the PC era, the iPhone will lack the broad backing of the open alternatives, such as Google's Android or Nokia's unified Symbian.

More important, this market too will mature. Eventually, Apple will be fighting the Google and Nokia hordes by rolling out cool new features here and there, but none of them will likely be enough to counter the lower prices and greater diversity of the open-source crowd's platforms.

Longer term, Apple will have to come to grips with the fact that Jobs will not be its CEO forever. When he leaves, Jobs will take with him the personal charisma that inspires Apple employees and fanatical customers willing to sit for hours outside Apple Stores for the latest gadget.

It's typical for top Apple execs and partners to occupy the front row at Apple event keynotes, like deacons of a high-tech church. They usually swarm Jobs after his talk with a warm round of hugs, handshakes and back slaps. It's a sight that speaks volumes about the level of commitment required to deliver the caliber of product Apple regularly kicks out.

The same devotion trickles down through the Apple organization. Staffers talk about seeing colleagues at their desks after midnight. During the run-up to a launch, Apple employees go missing at their usual social rounds for weeks at a time.

Outside the public eye, vendors are beaten down with greater severity than usual in the industry, pressed to deliver the goods at the lowest cost and to keep their lips sealed about the partnership. The climate is so stern that the former CEO of Infineon could not even acknowledge his company's design win in the iPhone during a January interview, even though teardown experts had already made it public months earlier.

Some people are willing to endure extraordinary levels of sacrifice for a leader who inspires. But when the day comes that Apple is managed by a mere mortal, that kind of commitment can no longer be expected. Apple will become just another handset maker with no more panache than Motorola or LG.

When that era comes, the new CEO of Apple would be prudent to follow in the footsteps of Google and Nokia and make the iPhone environment open, or at least licensable. The company will need an injection of energy to compensate for what it will lose with Jobs.

Google's battle plan
In the mobile era, Google is playing the role of the new Microsoft with its cool (but not quite as classy as the iPhone) handset software for the rest of us. The search giant is fast, flexible and financially fit for a long battle. And Google has skin in this game.

The Internet whiz kid needs to keep its sky-high stock price soaring with prospects of growth. When you already own the portal that brings every PC to the Web, the only way up is by owning the emerging mobile portal, too. Google will not cede that spot to iTunes without a fight.

Google has already tapped as partners the giants shut out of the iPhone crazehandset makers such as Samsung, LG and HTC, and chipset suppliers like TI and Qualcomm. Other members of the promising team Google has assembled include carriers in the United States, Japan and Europe, and a handful of mobile-software wannabes.

But if successful, Google will face the same problem in handsets that Microsoft faced in PCs: herding the cats. It will have to support, and ensure some level of interoperability, among the many, many OEMs, apps developers and peripherals makers that will want to play. The bigger the success, the bigger the headaches and the slower the progress.

Android "could potentially change the industry dynamics a lot, but it remains to be seen how the carriers accept it," said Khan of Samsung. Indeed, at press time, the first Android-based handset had yet to ship, and reports of software delays were widespread.

Trailing behind
By contrast, more than 200 million Symbian-based devices have shipped, accounting for as many as 60 percent of the smart phones in 2007. These handsets, backers claim, are supported by tens of thousands of applications. Nokia says at least 150 million of those phones are using its S60 interface, licensed by Lenovo, LG Electronics and Samsung.

But it will take developers as long as two years to meld all the pieces of the unified open-source platform Nokia plans. The environment will combine the best elements of the UIQ and MOAP(S) environments created by Sony Ericsson and Docomo, respectively. But it will not run existing apps written for those environments.

Worse, the unified Symbian will be defined by a complex set of interworking groups at the Symbian Foundationincluding separate councils on feature road mapping, user interface and architecturedrawn from the dozen companies that make up the new foundation. What's the Finnish term for "design by committee"?

Microsoft's Rockfeld foresees an "accordion effect" of new Linux mobile consortia forming, fragmenting the code base and then consolidating. "Linux consortia have a history of coming and going," he said.

In a way, both Nokia and Microsoft stand between the upstarts, Apple and Google, like homely but pleasant giantsthe Shreks of the established cellphone world.

Microsoft runs neck-and-neck with the crude Linux kernel in adoption in smart phones, at about 12 percent. Once versions of open-source code emerge with graceful interfaces created and managed by the likes of a Google and a Nokia, it will become harder to justify paying royalties to Redmond.

It's not hard to make a case that Microsoft has squandered its head start, having failed to deliver in seven years the kind of compelling Web experience Apple unveiled coming out of the gate. Eighteen months after the iPhone debuted, Microsoft can still not say with any clarity when it will natively support iPhone-like multitouch displays.

In the iPhone's wake, every self-respecting handset maker has beefed up its software engineering and partnerships, seeding what is still a wide-open field. Given this reality, the neutral stance of companies like Samsung and HTC makes sense for leveraging whatever comes from Google, Microsoft, Nokia or anywhere else. "We can create products that meet the needs of as many people as possible," said Samsung's Khan. "There is no one OS that satisfies everyone."

- Rick Merritt
EE Times

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