LONDON Volume is no promise of success for suppliers of semiconductors, IP, software, sensors and tuners in the complex market for handheld multimedia devices, according to analysts at Jon Peddie Research.
In a wide ranging report that took two years to assemble, John Peddie Research (Tiburon, Calif.) identifies market consolidation of suppliers (from 44 down to 26 with more assimilations and failures expected); the unrelenting march of Moore's law and its impact on coprocessors, applications processors, media processors, and baseband processors; as well as the role of IP in the design and development of devices such as mobile phones as some of the key factors and opportunities.
"Based on our extensive survey of hundreds of managers and engineers in the mobile market, clearly everyone is dazzled by the volume of handheld units shipped," said Jon Peddie, president of the consultancy group. "This is a serious mistake that has led to the failure of projects and companies as overall market volume is no predictor of profits or success," warns Peddie.
The report also concludes and forecasts that opportunities are extremely limited for semiconductor startups, and all but closed to entrepreneurs; critical mass in engineering and IP represent major barriers to entry; co-processors will be assimilated by SoCs; TV on mobile devices looks promising; open standards and APIs will enable the market; low cost phones are not the highest growth market by any metric; and that game development will finally take off in 2007.
As a consequence of the latter, Peddie suggests we can expect many acquisitions of game developer companies.
"The window is closed for start ups," says Peddie. "The operators, handset manufacturers and even the ODMs want to deal with big firms that will be able to supply large volumes of parts over many years; young companies without a solid track record present too much of a gamble."
The group forecasts compound annual growth between 2006 and 2010 of 25 percent for high end phones, from 152 million units shipped worldwide to 277 million by 2010; 16 percent in the same period for mid-range models from 349 million units to 532.9 million; and, going against the grain from other industry estimates, a slight decline in sales of low-end phones which it identifies as "closed systems with limited multimedia and data capabilities" from 483 million units sold this year declining to 464.5 million by 2010.
"While the industry sees great promise for selling mobile phones into high population emerging markets, it is vital to remember that median monthly incomes are $40 or less," says Peddie. "It is not exactly the pot of gold some people think it is, even if you can build a $30 phone, but there are indeed opportunities in low-cost phones."