The real issue of the three-device (smartphone, tablet, and notebook) endgame is not the form factor but a $6 billion revenue loss for carriers -- and potentially a huge problem for device manufacturers.
The Death of the Smartphone blog was perhaps too focused on the form factor battle of a user reducing from four to three devices.
The real issue of the three-device endgame is a $6 billion revenue loss and potentially a huge problem for device manufacturers. The 1 million of us who are tech-savvy (enough) might just decide to ditch the subsidized smartphone and go with near-free phone calls with longer upgrade cycles.
Taking the US mobile carrier business as a loose proxy for the global business, it's roughly a $30 billion business. At a microscopic level, my monthly AT&T phone bill was $500-$1,000 per month. It's not difficult for me to imagine about 1 million Americans with similar phone bills, with international voice and data roaming representing about 80% of the total bill. The $6 billion market is a rough but, I believe, good estimate of business mobile usage.
It's not difficult to notice apps like Whatsapp and Skype have become the long-distance carriers of choice when there is a wireless LAN network. But without a cellular network, it is just not reliable enough for business communication, regardless of how few impromptu calls we make anymore. Then comes T-Mobile.
When the proposed AT&T acquisition of T-Mobile failed, I don't think any of us thought it would change the world. But it did.
In desperation, I think, T-Mobile announced the global roaming data plan of around $100 for 3 GB of data, compared to a similar cost for just 150 MB of data from AT&T. Instantly, the reliable phone call problem was solved, rather elegantly, by a simple call forwarding from AT&T number to Skype number. With a working phone app paradigm and low-cost Internet access, I have turned off my smartphone during my international travel most of the time, using just my tablet instead.
There are several advantages.
First, the battery life is much longer than a smartphone. Second, the display size is now seven inches instead of four. Most important, my mobile phone bill has come down from an unpredictable $500-$1,000 per month to a predictable $200 per month -- half to AT&T and half to T-Mobile.
It's taken me a bit of time to get used to carrying a tablet to business lunches or using my tablet to make a phone call. After three months, I have now gone several days without touching my smartphone, especially if I am overseas. With just two devices in my backpack, I also misplace my gadgets less often. Last, because the tablet is my go-to device, I seem to read more books and get on to Facebook less.
I am not sure if T-Mobile intends to cannibalize the mobile industry -- or if, indeed, what I have experienced becomes the norm. If it does come to pass, then the mobile industry stands to lose about $6,000 per year in revenue from me. I am not sure if there are 1 million of us who spend this much annually in the US. If there were, then this would be a $6 billion revenue loss per year -- out of the total revenue of $308 billion for AT&T, Verizon, T-Mobile, and Sprint combined.
As for the handset makers, I think the impact might be less.
Instead of getting one smartphone per year, at a full retail price of $600, I think I will end up upgrading my tablet once every two years. Assuming handset makers don't share any of the profit on a monthly basis from the carriers, this could mean a revenue loss of just $600 million dollars per year.
The bigger issue is that, without the subsidy and, therefore, the rush to upgrade, the handset makers will lose their most effective marketing tool: the viral spread of new smartphones. I am not smart enough to predict the demise of the upgrade frenzy, but I believe it will definitely slow down.
The bottom line for the semiconductor industry in which I live is that smartphone growth rates will slow down faster than we have been used to seeing. If this blog had been published as soon as it was written in January, it would have foretold ARM's revenue and earnings shortfalls from the smartphone segment. But the PR department and I just moonlight as journalists, so there you go.
— Charlie Cheng is the CEO of Kilopass Technology.