Cell Phones Becoming Profitless

saccade.com writes "EE Times has a fascinating article on how electronics companies are being sucked into a profitless spiral by the cell phone market. More and more of the small consumer gadgets are being folded into the phone: camera, music player, PDA, GPS, etc. So the market for non-phone gadgets is slowly going away as the phone picks up more functions. However, consumers don't buy most phones; they are given away (or sold very cheap) by the service providers as hooks to get people to sign up for mobile service. So the service providers are demanding (and getting) rock-bottom prices for fancy phones they can give away, and the micro chip companies are forced into brutal competition for a market that is shrinking into a single commodity gadget, the phone."

Comments

Good!

[Anonymous Coward]

Maybe the cellphone companies will all go bankrupt and we won't have to put up with annoying idiots blabbering away in every place imaginable.

Re:Very misleading and uninformed

[adzoox]

Just because you work for a manufacturer doesn't mean YOU know what your company produces phones for.

Saying such is like an Apple store employee trying to leak rumors about products - they don't know.

NOKIA lost marketshare and profitability because they suck as of late - no other reason.

Can you say multimillion dollar failure? NGage

Can you say poor design? All this strange button layout.

Can you say poor integration? Bluetooth implementation is slightly different and doesn't work properly with iSync

Sony Ericcson on the other hand reported RECORD sales and profits from their phones. Wow and whatta you know, just the opposite.

"As a fashion accessory, phones are now in the bargain-bin only a couple of months after we finished them! The ability to make money in this environment is almost zero, and the work soul-destroying."

Untrue, The t610 Sony Ericcson is a best seller... why?... because it's a good design, it works well, and all of it's feature set is relatively accessible to the laymen. It also is the single most useful piece of equipment next to my Apple Laptop I have EVER owned due to Salling Clicker and Bluetooth. It still costs $90 to the cell service providers (T616) - costs $38 to make - Sony produces a VERY big portion of the phone in house (whereas Nokia is a component combiner for the most part) and makes a pretty big profit.

I agree that margins may be thin on SOME phones, but manufacturers are getting an average of 7%-20% on total cell phone sales. IT HAS ALWAYS been the carriers that are taking the loss.

Now, the cell phone manufacturers might be squeezing the component manufacturers a little as another post has suggested.