iSuppli analyzes wireless applications trends
September 16, 2010 GSA Expo, Santa Clara, CA Jagdish Rebello, Senior Director & Principal Analyst, Communications & Consumer Electronics, iSuppli Corporation presented his take on wireless applications in his talk “Consumer Connectivity Trends – The Battle to Meet Wireless Application Demands”
Consumer electronics has been evolving from analog devices, to the second-generation digital devices, and now in the third generation as networked devices. The latest devices are driven by digital content from multiple sources to many platforms. Consumers want access to a variety of content from many avenues. The growing list of content sources include Internet, personal content, friends, and external services which supply music, video, games, and phone connections. The platforms that deliver this content include set-top boxes, connected televisions, Blu-Ray players, game consoles, PCs, and even cameras.
Because of the high diversity of content, sources, and platforms, many companies can benefit from the opportunities. To take advantage of these opportunities requires companies identify and understand the answers to three critical questions. First, how does content get to the consumer? Delivery mechanisms include cable, DSL, optical fiber, and wireless, but one issue is the total bandwidth capacity within the systems.
Second, what platforms will be used to consume the content? Consumption platforms include TV, set-top box, Blu-Ray player, smart phone, and others. The challenge is to enable all devices to support all media and delivery systems. Third, how does this content gets distributed between devices? Assuming that it’s possible to transfer content across platforms, will distribution be through wireless local area networks, wired technologies, or some other mechanism.
So what’s driving this transition to third generation consumer electronics? First is the adoption rates of broadband, with data speeds increasing at an exponential rate. Second is video consumption via the web, enabling cord cutting for cable subscribers. As is always the case with electronics, the prices and functionality of equipment continues to drop, making third-generation devices much more affordable and with more included functions. The availability of bandwidth permits content to be consumed everywhere, including the latest smart phones and other mobile devices.
Convergence of consumer, communications, and computing now exists as applications, features, functionality are blurring and blending across former boundaries. Computing platforms are adopting consumer interfaces, while consumer electronics are becoming Internet and network connected. Last year, a little over a quarter of consumer electronics devices were internet-enabled. By 2014, it is expected to grow 68 percent. Most of this connectivity will be television related, through televisions, game consoles, set-top boxes, and Blu-Ray players.
Internet-enabled television can connect directly to the source of the content, bypassing add-on boxes. This is not a full replacement for a traditional service provider because content is limited, but could be supplemented with over-the-top services. TV manufacturers are pushing Internet television as a differentiator, but software and user interfaces are key to customer acceptance.
To support Internet activity requires televisions to incorporate network technologies into their designs. A number of organizations are working on creating interoperability standards so the various wire and wireless networking media can work with appropriate digital rights management systems to provide television plus apps. In addition, specialist consulting services are becoming necessary to connect and configure systems.
This content will not only be consumed on televisions, but also on smart phones. Most analysts predict smart phones will be the largest growth segment in the mobile marketplace. Consumers have made a major shift in content and information access in moving to smart phones. This is both good and bad for various segments of the industry.
Service providers are seeing vastly increased usage of their network as consumers use their phones for more than just voice calls. Unfortunately, this explosion in data traffic is straining the mobile network capacity. Device OEMs have much higher ASPs for their products, but these higher prices are spurring competition from new players. Application developers have a new channel to market, but have greater complexity and have to support multiple platforms, operating systems, and displays. Component suppliers are selling higher value semiconductors, displays, image sensors, and actuators, but need different architectures to support different product segments.
The mobile communications value chain is getting much more complex. There is much more interplay and interaction between suppliers, OEMs, software, service providers, retailers, and consumers. The value chain is rapidly moving from the linear to mesh structure as these interactions forced changes in business models and relationships.
It’s time for new thinking in the communications industry. There are a lot of new revenue opportunities and challenges for the value chain. Service providers are evolving new business models for data revenue as data volume exceeds voice traffic. There’s no simple choice between dumb pipe versus smart pipes, and regulatory issues may intrude in the future. Other areas of the supply chain are seeing similar challenges that are brought on by the growing opportunities. It’s not simply a survival of fittest at this point in time, rather limitation of the players is critical for the growth of the industry. Establishing use cases and enhancing user experience is as critical as feature sets, in this new environment.
For the consumer, the mobile device landscape is now connected, converged, and probably confusing. There are connected consumer devices, wireless devices, and converged devices that can be again separated into both dedicated functions and more general purpose functions. Nevertheless, mobile connected devices are attractive to both operators and consumers. Increased compute power and larger screens encouraged increase mobile data usage and new use cases, since users are already familiar with downloading programs and applications.
Add on accessories for net books and notebooks allow these boxes to become mobile-connected platforms. Connected computer devices are expected to see very strong growth for the next four years. Tablets will also see strong growth as these devices provide a hybrid path of greater portability with slightly reduced functionality and performance compared to a notebook or net book. They also provide better and larger displays than smart phones.
All of these changes in the markets are driving the silicon providers to have a targeted market segment strategy. It’s critical to have the right products for the target market, while making sure the platform-based designs can be reused across all segments. To do more with less, silicon providers must spend a lot on R&D and in licensing IP. Different market segments require targeted product architectures, and there are as many architectures possible to solve problems as there are multiple markets. Higher levels of integration are obviously necessary to create a manageable number of products.
The technology exists for users to obtain content through a range of systems, and access the content on a variety of playback and display devices. One hurdle is that standards need to become finalized before proliferation and the hardware platforms must support these standards robustly. The industry needs to develop an education program to teach the consumer about the possibilities of a digital living room, which is not just a collection of diverse boxes and wires as in the past, but is a unified and informative new experience. And to provide all of these things, the people in the supply chain must develop viable business models that simultaneously satisfies content owners, service providers, and users.
Communications and consumer electronics are currently balanced at the point of the new growth curve. Growth will be driven by new business models from new players, and continued and increased cooperative competition is critical to the success of the industry. Exclusivity of content and devices can hurt the industry growth momentum, because it can make users feel restricted. All of these technologies are directed towards an enhanced user experience that is critical to unlocking the next trillion dollars in value.
