Saturday, November 13, 2010

Flash! Android is bringing commoditization!

the major goal of Android was and has always been commoditization: before Android smartphones were hard and now they’re easy. This is a point I’ve been making for a while, including August 2009, January 2010, March and earlier this month.

Now Forbes, its CIO network and the NPD consultants at PRTM have figured this out. To quote their article:

In 2007, Android looked like an experiment as well as a great and cheap way to challenge the extraordinary success of Apple and its iOS-iPhone-iTunes combination. But the success of the venture has unleashed a tiger, and now the handset companies are starting to look like its lunch.
More importantly, the PRTM consultants have put numbers to the trend:
  • From Android 1.6 to 2.1, cycle time for new handsets dropped from 8 months to 4.5 months
  • Most vendors bring new handsets to market within 16-20 weeks of a new Android release, eliminating any temporary OS exclusive.
To quote the report by David van Oss and Huw Andrews of PRTM, gross handset margins will shrink to the 8-10% common for commodity PC makers.

They encourage handset makers to find other sources of differentiation or perhaps look for a second handset OS. Perhaps they can use their custom Android UIs to create brand loyalty — I find this highly doubtful, but they may create gratuitous switching costs.

Van Oss and Andrews predict Google will charge a royalty for Android. Yes, the company’s got conflicting goals — promoting its mobile platform vs. promoting mobile search use. But I don’t see a scenario in the next 3 years that has Google trying to extract royalties from the Android platform. (Fine print: I won’t rule out it offering new “must have” royalty-bearing technology like voice recognition).

A lot could happen in three years. By then, Nokia could be making Android handsets, or the Chinese could be shipping the majority of the world’s smartphones. Or smartphones could be on their way out, replaced by tablets. So anything beyond then is pure speculation.

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