MADISON, Wis. — Connect the dots among the three big moves Google made this month to dump Motorola, snatch up Nest and make peace with Samsung, and what do you get?
I see the end of the smartphone era -- or more accurately, the international consumer love affair with smartphones. The honeymoon is over. I'm calling it now.
Google's decision to sell Motorola's mobile assets (sans a majority of its IPs) to Chinese behemoth Lenovoisn't exactly signaling Google's defeat, or even America's defeat against China.
I see some overheated media reports blaming Google for failing to deliver its promise: "...to reinvent mobile hardware with Motorola's new phones, and directly compete with Apple by owning both mobile hardware and software."
Just as much as I want to keep manufacturing jobs in America, I don't fault Google for this decision. The new Google-Lenovo deal shows a significant recognition by Google that the company has little to gain by hanging on to the smartphone hardware business.
Added values are in peripherals
Now, contrast this decision against Google's $3.2 billion purchase of Nest.
Nest's Learning Thermostat and Protect smoke and carbon monoxide alarm are both designed to connect to one receiver: the Nest app on a smartphone.
The value here isn't the smartphone itself, but in peripherals -- the software and hardware that run Nest. The smartphone, a mere messenger for these functions, is fast becoming a commodity.
To be sure, I'm not forecasting the eclipse of the smartphone. Smartphones will still be ubiquitous for years to come, their value intact. But the smartphone's key function will be a modem, attached to a myriad of connected devices and technologies.
In short, the world is about to flip.
Gone is the conventional wisdom of cramming more and more bells and whistles into smartphones so that smartphones can morph into something else. Emerging is a new world where the existence of smartphones is a given. Added value, where new competition will unfold, is not in smartphones themselves, but in "peripherals" (some call it the Internet of Things) that will leverage the smartphone's connectivity.
Now, let's add these two events (dumping Motorola and buying Nest) to last Sunday's patent truce between Google and Samsung.
That move will "short circuit" the drawn-out legal wrangling we see today, as Francis Sideco, senior director of consumer electronics and communications technologies at IHS, told EE Times. The "eventual reality" perceived by both companies is that nobody wins hands down in any litigation. While winning some individual cases and losing some, the net loss for both sides is in time and energy, and in the vast sums squandered on lawyers, Sidesco explained.
But more to the point, the significance of the Google/Samsung cross-licensing agreement, as Ron Epstein, principal at Epicenter IP Group, put it earlier this week, is this: "The [smartphone] platform battle -- initiated by patent wars -- is coming to an end."
Clearly, both Google and Samsung are seeing the value of doing business together by trading patents.
The flip side of this détente, though, is the maturing of the smartphone business. If we were still in the early days of smartphone innovation, this wouldn't have happened.
The end of an era
The end of an era for smartphones is a difficult prospect to face. After all, the smartphone market has been the engine of the electronics industry in the last several years. And yet, think about this: For a few years, other than the screen size of a handset, the industry hasn't been able to significantly improve or differentiate the smartphones on the market today.
The state of the smartphone industry today bears a striking resemblance to the moment in 2005 when the novelty of notebook computers began wearing off and IBM sold its PC business to Lenovo.
The difference now is that the PC business then was predominantly owned by Taiwanese (and some Japanese) companies. The smartphone business for the next decade will be dominated by (mainland) Chinese OEMs including Lenovo, Huawei, ZTE, and many other names still unfamiliar in the United States yet.
As many of my engineer friends in China would tell me, Lenovo has a stellar reputation for technology, quality, talent and discipline. (In contrast, from what I gather about ZTE, not so much.) Lenovo is also ambitious. Last year, it even assembled a team of engineers to start developing its own application processors for smartphones -- in order to differentiate their products.
Nobody better take lightly what Lenovo can do.
In an environment that will be marked by a declined smartphone innovation, Apple's next move -- virtually the first major initiative in the post-Steve Jobs era -- will be huge.
— Junko Yoshida, Chief International Correspondent, EE Times