Cell phone and other CE manufacturers are growing their revenues and increasing market share by developing products for still-emerging global markets. Motorola believes this market segment has the potential to add more than 100 million new mobile users per year. The GSM Association (GSMA) estimates that even though 80 percent of the world’s population has wireless access, only about 25 percent can use it. The reason, according to the GSMA, is cost, which it says has become the single biggest barrier to mobile communications usage in slow-to-develop markets.

Research firm Informa Telecoms and Media says it is essential to tailor services to these markets and that easy-to-use, cheap mobile handsets represent a crucial market for cell phone manufacturers.

Motorola and Nokia already are gaining ground in several regions of the world with cell phones priced in the $30 to $40 range, while MIT Media Laboratory is making plans to launch a $100 laptop computer it hopes to sell in the hundreds of millions by the end of 2006. The MIT Media Lab has formed several industry partnerships to develop the portable PCs for use by children, particularly in developing countries.

Where are these markets? Particular targets of opportunity for these cheaper products are India, South Africa, Russia, Egypt, Turkey, Indonesia, the Philippines and certain regions of China.

Motorola was selected last year by the GSMA to supply the first handsets for its Emerging Market Handset (EMH) program, which the association considers critical to the social and economic development of many of these markets.

Motorola kicked off its program with a family of products built on its low-cost C114 product platform. Initial volume set for the first six months was set at six million units, which equates to about one percent of the global handset market.

  The shift to 90 nm also cuts manufacturing cost by reducing the die size of the chips, providing close to 50 percent more die per silicon wafer and allowing TI to cut the price of its devices by more than half.    
  
Nokia Presses GSM Points

Nokia has announced plans to sell its new folding handset cheaply in rapid-growth markets like China and Africa, and is looking at other developing markets, including Brazil, Russia and India. Last year, Nokia introduced two low-end models, the 1110 and 1600, targeting first-time users in developing world markets.

Nokia already has projected the mobile subscriber base at three billion by 2010, and says it believes much of this growth will be fueled by markets which currently have a low mobile penetration rate. “Nokia believes that reducing the total cost of ownership for both affordable handsets and mobile voice services are the key when it comes to reaching the next billion consumers in new growth markets,” says Soren Petersen, senior vice president, Nokia Mobile Phones. With the right combination of mobile phones, network solutions, services and a regulated environment, Petersen says Nokia envisions a mobile landscape where operators can profitably offer mobile services to a broader range of consumers for as little as $5 a month and still make a profit.

Nokia says its GSM handsets, including its models 2652 (a revamped version of Nokia’s 2650 phone) and 1600 (for GSM 900/1800/1900), are very popular in entry-level markets and probably would retail initially for about $120 in China, the Middle East, and Africa.

Gartner, the market research consultancy, says combined sales of mobile phones in Eastern Europe, the Middle East, and Africa grew 37 percent, as mobile phone sales rose to 33.6 million units in the second quarter of 2005. Gartner also notes that the markets in Russia, Poland, Ukraine, Turkey and Nigeria attracted more subscribers and boosted the aggregate total. Ann Liang, principal analyst for mobile terminal research at Gartner, based in Taiwan, says, “The healthy performance in Asia/Pacific [excluding Japan] was mainly due to strong demand for handsets in emerging markets such as China, India, Bangladesh and Vietnam.”

What’s Old Is New

Forward Concepts, which forecasts markets and technology trends, expects Texas Instruments, already the leading cell phone chip provider overall and the number-one provider of baseband chips for both 2G and 3G/UMTS cellular, to help drive lower priced cell phone models with its 90 nm chip technology. “Cheap cell phone chips could come from two sources,” says Will Strauss, Forward Concepts president. One is 90 nm chips with almost everything integrated on a single chip, plus power amplifier and maybe power management chips.

Nokia and Motorola already have announced that they will use the TI “single chip solution” in sub-$40 phones, while Qualcomm recently demonstrated a cell phone it priced at $40 using its chips.

The 90 nm chips, which TI began shipping two years ago, have several advantages. They are faster and smaller than previous cell phone chips. Also, placing transistors closer together increases speed of operation, as well as allowing a higher density of on-chip memory to increase application efficiency. The shift to 90 nm also cuts manufacturing cost by reducing the die size of the chips, providing close to 50 percent more die per silicon wafer and allowing TI to cut the price of its devices by more than half.

The second reason Strauss gives for making cheap cell phones possible is that older, 180 um chips already have seen most of their life written off. “Consequently, it’s possible that the older designs could be made cheaper.” However, Strauss says he expects the newer 90 nm chips will prevail. TI says it will be able to produce chips cheap enough to enable cell phone manufacturers to produce handsets for less than $15 by 2008, but it doesn’t believe these handsets will sell very well, even in emerging markets. The reason, says TI, is that consumers, even those in these currently emerging markets, will want features that will boost the price of handsets, especially as these markets mature.

However, some of those features, including color displays and data-based services, already are being made available in these so-called emerging markets.

As a result, Strauss, like other analysts, sees a big opportunity for low-end phones. “In places like China and India,” he says, “the relatively rich people already have bought their cell phones. Members of the much bigger poor population have yet to buy one, and for that reason, we expect to see sharp growth at the low end beginning in the second half of 2006.”

With an estimated 2.5 million new cell phone users a month, and India now insisting that global telecom equipment makers manufacture equipment in India if they want to bid for orders from state-run carriers, Nokia has decided to build a manufacturing plant for mobile phones in southern India at a cost of more than $100 million. Construction is scheduled to start in April with production expected to begin in the first half of 2006.

More recently, Motorola unveiled a new portfolio of products it plans to use in its EMH “mass market” program. These include the C118, C139, C168, C257, and C261, which offer several high-end-type features, such as TFT displays, FM radio, a camera, and speakerphone. Motorola showcased these models at the Emerging Market Pavilion at 3GSM Asia in Singapore in September.

Bang & Olufsen, meanwhile, is working the other end of the product design spectrum. Known for its stylish, high-end products, the Danish maker of audio and other consumer electronics gear has teamed up with Samsung Electronics to launch a high-end, but “easy to use” mobile phone, targeting Bang & Olufsen’s own stores and through high-end Samsung distribution partners in Europe, Russia and the Ukraine.

One analyst referred to Bang & Olufsen’s move a “brand extension” that combines the expertise of both companies’ competencies.

$100 Laptops?

The MIT Media Labs’ $100 laptop computer is expected to start appearing in volume in late 2006 or early 2007. The 500-MHz laptop will run what Nicholas Negroponte, the lab’s chairman and co-founder, calls a “skinny version” of the open-source Linux operating system, which is free to users. The laptops will be WiFi- and cell phone-enabled, and have multiple USB ports.

Says Negroponte, “Kids in the developing world need the newest technology, especially really rugged hardware and innovative software.” He says that in one Cambodian village where he and other lab members have been working, there is no electricity. “Thus the laptop is, among other things, the brightest light source in the home.”

The first-generation model will use a novel dual-mode LCD display commonly found in inexpensive DVD players, but that can also be used in black and white. Negroponte adds, “We will market the laptops in very large numbers, in the millions, directly to ministries of education, which can distribute them like textbooks.”

Initial discussions already have been held with China, Brazil, Thailand and Egypt. Additional countries will be selected for beta testing. Initial orders will be limited to a minimum of one million units, with appropriate financing.

Organizationally, MIT will work with a small number of companies capable of developing and manufacturing laptops in less than 12 months. The objective is to produce 100 million to 200 million units by the following year. Initially, the five companies who have committed to the project are AMD, Brightstar, Google, News Corp., and Red Hat. MIT will also work with the not-for-profit company One Laptop Child, as well as with the 2B1 Foundation.

“The biggest hurdle,” says Negroponte, “will be manufacturing 100 million of anything. This is not just a supply-chain problem, but also a design problem. The scale is daunting, but I find myself amazed at what some companies are proposing to us. It feels as though at least half the problems are being solved by mere resolve.” V

By Ron Schneiderman
January/February 2006