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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."
Cell phones are in the process of crossing the chasm between phones and replacements for your PC. Until this job is complete, margins will be way down.
In three years, I will bet anything that you will be able to connect a bluetooth mouse, keyboard and some sort of monitor to your cell phone (probably via it's charging cradle). For most users, these devices will be powerful enough to toss their PCs for good.
But to get there, the industry is running uphill at a breakneck rate - features and technology are going nutz - it is EXPENSIVE to make this transition.
It is your personal duty to fight for what is right on a daily basis. Ignoring injustice is identical to approving
the micro chip companies are forced into brutal competition for a market that is shrinking into a single commodity gadget, the phone.
Free country, free market, free economy. If you don't like the heat- get out of the kitchen. Nobody's forcing you to sell low-margin products, and they have nobody to blame but themselves if they're only making stuff for cell phones. It's not like they woke up one morning and said "oh my gosh, someone changed our product lineup to be just stuff for cellphones!" Furthermore, I don't really believe it- plenty of semiconductor companies make stuff that has absolutely nothing to do with cell phones.
If it -is- true, who's to say this shakeup is a bad thing? That's the wonderful thing about a competitive market- if a company can't make a profit on a device, they won't make it. If there are too many companies making a widget, the price will go low and only the strong companies will survive.
The fantastic thing is that if the strong companies start to suck, well- a market forms for an competitor because there will be something to differentiate their product. Not only that, but if it's better- they can price it higher, and (gasp!) make more money!
Please help metamoderate.
My thoughts exactly. I did rtfa and I don't buy it. Much like the all-in-one printer/scanner/copier/phone/fax/kitchen sink devices out there, I'd much rather have a few gadgets which do their job excellently than one which does several jobs in a slip-shod manner. I don't like camera phones. They're slow and have horrible resolution. The PDA/phone hybrids are much too large to carry comfortably in my pocket. I'm completely happy with paying $150 for my small cell phone which gives excellent reception in most locations, a couple more hundred for my digital camera, and some more hundreds for my Neuros MP3 player. And, most of my friends feel the same way. Some day when miniaturization and overall quality of such products improves, then I'll reconsider.
I also reply below your current threshold.
Of course cell phones are profitable - if they were not profitable, the cell phone manufacturers would create more profitable products.
And in fact, that's what they do.
Of course, for tax purposes, it is best if they show on the books that they lose money. As we've seen in many industries (manufacturing, healthcare, defense, MLB, etc) it's rather easy to show enough loss to avoid paying taxes. It is fact that corporations (at least in the USA) pay many fewer taxes as they did 5 years ago. The primary reason? Tax avoidance through "magic" accounting techniques.
If there was no money in the business, the shareholders would put a stop to it - after all, most cell phone manufacturers make many other products. But amazingly, looking at the past 5 years, share prices remain fairly stable compared to the overall tech sector.
In the case of a PC, the integrated motherboard costs less than the original motherboard, a sound card, and a network card.
In the case of a phone, the integrated PDA+phone is far more expensive than a much better PDA, and a phone.
If only this weren't true, I would be a happy, happy person right now, as I'm looking for a new phone and a new PDA, and am hating that I can't afford the combined systems.
Karma: It's all a bunch of tree-huggin' hippy crap!
Cell phone companies should be forced to label their "phones" to help people make better decisions. They should show 1) Antenna gain, 2) Standby battery life and 3) Talk time on every phone, very clearly, just like mileage on cars. If cell phones are going to be important parts of our communication system, people should make decisions based on criteria that MATTER instead of mindless feature creep.
I'm in the hole of the broadband donut.
There's even one of those folding keyboards with bluetooth coming out that I'd love to buy next for it.
And if that's not enough, how about all the neat Symbian programs you can buy for it, like turning it into the ultimate universal remote control
And the camera in it feeds my addiction to mobog.com.
Anyhoo, sucker cost me $420. Someone made some coin on it.
I've owned a few PDAs including a Casio E100, E110, and a Dell Axim. Junk basically, and using imap or pop with pocket outlook is ultra painful. Too big and that resulted in me never carrying the thing. To get wireless internet access through the thing was another hassle.
This (nokia 6600 phone) puppy is just the right size for me.
I do not need a camera, voice memos, video games, downloadable polyphonic symphonic psychedelic ringtones, an MP3 player; barely functional text messaging, even more barely functional email, or a "web browser" that makes driving to the New York Public Library and looking up what I need to know seem efficient (I live in Virginia); Bluetooth, Compact Flash, color high-resolution display requiring exponents to describe, inaudible speaker phone, or a multi-billion dollar ad campaign that causes seizures in small children and house pets to tell me how this new phone is going to Change My Life Forever! (TM)
I do need good signal handling and audio; a phone book designed for people who actually a) read, and b) make phone calls; maybe a vibrating ringer available at every ring volume, not just the top and bottom; and a user interface that doesn't remind me of the very first freshman programming project of the year. For fancy occasions, an alarm clock can be nice.
A provider network that wasn't engineered by beauty-school dropouts would be nice, too, but that's another issue.
-Edgar
In most of the world, phones _are_ sold to consumers. While European service providers also use cheap/free phones to lure customers, there is no obstacle here to use whatever phone you want with a given subscription. Lots of phone stores and home electronic stores have display cases filled with phones of all kinds.
The problem really is created by the manufacturers as much as the providers. The phone has become a fashion item; for quite a lot of people, the phone you use tells others about who you are. Thus people tend to want to get a new phone very often, as fashions and designs change. That drives down prices a lot, as people can't afford to get a new, really expensive, phone every year, and on the other hand, the manufacturers dump the prices of their new models in order to make them the next must-have.
In a sense, it's the SIM card that defines their phone for people - that's the thing that holds their subscription, as well as address lists, phone numbers and so on. The phone hardware it currently sits in is just another fancy shell, to be discarded whenever the next model comes along.
Trust the Computer. The Computer is your friend.
This is the exact reason why Nokia 3310 and 3315 phones are so predominant in Australia. These phones went for about $150 a pop last time I checked and came with a pre-paid plan, Optus phones were network locked IIRC but Telstra phones were not. So now there is a massive market for 3310 covers because every teenager who didn't want to get locked into contract bought one.
Now phone companies are having a really hard time trying to flog off MMS phones, no one can see the point of buying a new phone so they can send 95 cent messages to each other.
As a side note it has also resulted in whats called a "Nokia salute" at teeniebopper concerts where cigarette lighters are not allowed. Just press enter on the phone and hold up the phone for the band to see.
I thought about what else could be added into a phone some time ago and here is a list. Some of these features are already in some phones, but not all of them combined.
Tri-band GSM - So that the phone works in europe, australia and the US.
GPS - with maps so that you can use it like one of the purpose built devices.
Camera Phone - which uses GPS to add where the photo was taken to it.
MP3 Player
10-20Gb of Disk space using one of those tiny hard disks that have been developed.
802.11G wireless networking - allowing the user to link to thier mobile phone in there pocket. This would allow them to use it alot like the USB Memory keys now except without having to plug it in.
An Environment that can run programs that have been saved to the hard disk and use all the features of the phone (possibly java).
Easy Syncronization with outlook or some other calendar program. + Easy to expand syncronization technology for other purposes. eg Automatic backup of work files to home with each trip.
Bluetooth - to allow connection to various external devices like keyboards and the like.
A earphone the size of a hearing aid that links via bluetooth to the phone, that allows it to stay in you ear all the time.
A feature that would allow a signal to be transmitted to the phone to automatically put the phone in to silent mode. This would be good for cinemas and other public venues
color screen
good games - need I say more
Barcode reader and RFID scanner - so that you can do price comparision shopping + other industrial uses
Universial remote control.
Battery life exceeding 1-2 days, after which it doesn't forget all its settings like alot of the pda's do.
When I first started thinking about this, by using external components it would have costed about $10,000. Now I think it would be under half that, and still dropping. Thats if you could get a phone like that though!!!
Also the security implications of a device like the above would have to be well thought through.
This fluid lens technology from Philips Research may eliminate some of the physical limitations of optics and allow camera phones to one day rival full-size cameras in image quality.
What I find interesting is that no one in this thead has yet pointed out that not one manufacturer has given a damn about the quality of voice at both ends of the phone. I still use my five year old Qualcomm 2700 (made by Sony) becase even though I have tried *every* other cell phone on the market today, not one sounds as good (either at my end, or to the other party) as that old 2700. I've seen some explanations of why this is so, the main one being that the latest compression algorithms are all about squeezing as many people onto a tower as possible, regardless of what it ends up sounding like. One would think that after all these years cell phones would sound like a frigging high end stereo system, but instead all the tech has gone into blinking lights! The phone part has SUFFERED for all the tech. I just think it's weird. It's not just me, either -- I have had dozens of people try my old Qualcomm and they are always amazed at how good it sounds.