MWC: Outsiders storm smartphone market

Smartphone makers’ challenges

The smartphone market historically has been a high-growth, high-volume, high-revenue and high-ARPU space, so it makes sense for other companies to want a piece of the action, Mawston added.

But what all these potential new smartphone entrants have in common is that they are up against a lack of experience and a market in the midst of an economic recession. While many analysts have smartphones pegged as more recession-proof than other industry sectors, the equipment makers will be up against some serious competition and expenses. Smartphones may be attracting the lion’s share of attention, but it’s still a market characterized by a growth phase, Mawston said. It’s normal for the growth phase to be followed by an influx of followers, and the end result is an over-supplied market that is ultimately winnowed to just four or five dominant providers.

“It’s hard to say who will win and lose, but Dell, Microsoft and Acer have less experience in making and distributing mobile handsets, so they will have challenges,” he said.

Aside from the competition, a brand-new handset built by a brand-new player targeted at the premium high-tier market could cost upward of $100 million, Mawston said. Companies can lower the cost by outsourcing, as Garmin is with Asus, but it’s an expensive gamble to make either way. “It’s easy if you have the cash, but then making money out of it is pretty difficult,” he said.