3G Success Depends on handsets

[Hands0n]

Another interesting article from The Register --> http://www.theregister.co.uk/2005/02/07/3g_success/

Some highlights (below) from the whole article revieal that it really is about manufacturer margins. New, cheaper chipsets on the way to reduce production cost while increasing margins. But wait! There is competition emerging, putting pressure on even these. But there is plenty of meat on the bone still, and opportunity to keep it that way for a while longer. But prices have to come down to be able to enter the "more price sensitive markets" such as India etc.

The slowness of 3G to start to deliver on its promises is well documented, and the operators have laid the blame firmly at the door of the handset makers. Many of their complaints were politically motivated, as part of the ongoing battle between phonemakers and cellcos to take the 3G driving seat. But now that UMTS and EV-DO networks are rolling out, commercial success will rely heavily on having handsets with the right functionality, usability and price.

Handset makers, like cellcos, once dreamed that 3G’s advantages would enable them to charge high prices and increase their margins.

Last year we saw the UK’s first 3G operator, Hutchison’s 3, starting to compete primarily on the basis of low cost voice minutes and slashing the prices it charged subscribers for handsets. Now NTT DoCoMo of Japan has announced that it will seek to boost uptake of its 3G FOMA service by cutting handset costs by about Yen10,000.

............the high end phonemakers, which have set heavy store by high end, high margin smartphones, need to ensure they can deliver those products - which are key to differentiating them from hosts of low costs rivals – at lower cost

This will mean putting smartphone features into midrange phones, but retaining a high margin ............

[Ben]

I think the traditional GSM handset makers, especially Nokia, are going to find hard times coming their way. The traditional margins Nokia has so desperately tried to hold on to just can't continue - they're having to cram a lot more into their phones but consumers just aren't excited enough about 3G to pay more.

Luckily, margins aside, some nice looking 3G handsets are coming out this year. I'm not convinced by NEC, Motorola or LGE's efforts to date, but if what they release this year is along the lines of the K600i or 6680 then there's going to be a lot of people ready to make the switch.

If I wasn't a 3G enthusiast I certainly wouldn't have made the switch yet (in some cases Three is excluded from that statement - but thats about their tariffs not their handsets) - is all that about to change?