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Summary of Device Industry Insight

|Includes: Apple Inc. (AAPL), HTCCF
1.        The key element of success of application stores lies in not development but operation.
Operating application stores needs internet culture and mechanism. Manufacturing companies find it very difficult to do well only by themselves. Investment in service providers may be a good solution.
2.        The key element of success of OS lies in not development but propaganda.
ü         BADA will probably fail partly because Korea market is too small and industry chain is weak.
ü         China has the best handset industry chain in the world. The key point of success in China OS is to integrate diverse resources and gain support from partners.
ü        HTC has recently made correct choice to move its root from western world to China gradually.
3.        MTK’s 6573 has opened a new era of low-end smartphones, shorting the lifespan of smartphone industry.
It seems that Qualcomm finds it uneasy to respond quickly to the attack of its Asian rival. Before the completion of substantial adjustment of new financing system, customer support and local design center, the loss of market share is highly likely to be unavoidable.
4.        Apple is falling soon.
Innovation is brilliant but hard to sustain. Apple has made tremendous success in MP3, handset and flat computer. Moreover, Apple has opened the era of mobile internet, internet service + mobile devices. However, it is coming to the end. The sense of human begins drives people to buy comparable but cheap commodities. The failure of attempting to break the monopoly of MSO in USA and open home market accelerates the fall.
5.        Commoditization is accelerating.
As the entry level of smartphones is much lower with the emergence of MTK’s 6573 and the stability and rich functions of Android, more and more companies will pour into this field in next few years, which was ever seen in the era of PC. The mess of two to three years seems inevitable. However, after that, dominant giants will eventually consolidate their positions and command the industry chain.
6.        Differentiation focuses more on lifestyle and culture.
Smartphones differ from PC with its representation of personalities of individuals. Under the pressure of commoditization, lots of companies have to turn their attention to the research of lifestyle and culture. Crossing-culture opportunities are showing up.
7.        Internet service providers will create considerable niche markets of devices.
The rapid growth of wireless bandwidth boosts the increasing power of internet service providers. Internet service provider are likely to imitate the current business model of telecom carriers, issuing orders and subsidizing customized devices. Device makers which lack the gene and ability of good cost control would have to learn how to survive in such niche markets.