the iPhone is changing device standards globally !

The apple of many eyes, the iPhone, is said to be changing device standards globally. People now desire many more features, applications, and interesting user interfaces all packed in a seductive form factor.

It may be sometime before we can determine what the phone’s impact in India will be. By most accounts, the country does not have too many users of feature-rich phones' chip maker Texas Instruments, a primary supplier to the handset industry, says the mix of low cost phones to premium phones is about 70 to 30. Market research firm IDC estimates smart phone volumes at five per cent of overall handset volumes in 2007: last year, the category totaled Rs 5,000 crore while volumes touched 4 million units.

However, phone makers claim considerable progress in converting users of less advanced devices into the ‘smart’ category. Yes, iPhone's entry does mean harder competition for firms already present but some also view this as an opportunity " the marketing dollars Apple will push in will help build awareness about smart phones and touch screens, helping the market expand. IDC expects a 32 per cent smart phone market growth to Rs. 6,600 crore in 2008; shipment volumes may total 5 million units.

As of now, handset makers say smart phones have found traction beyond business users. World’s biggest cell phone maker Nokia, for instance, says usage has gone beyond Social Economic Class A, the high class. "Buyers are largely youngsters and professionals. That's the bull's eye target group," head of the firm's India Go to Market Vineet Taneja tells.

What is interesting is the second hand market. "Smart phones can now be found with drivers and people you don't expect to use. That’s because there is a second hand market. It’s a positive sign. However, this is something we are not activating in any way," he says.

Smart phone maker HTC feels the market for these advanced devices will be driven by better form factors, which are more beautiful today, besides cheaper models. "It’s beginning to be a lifestyle product. Price points used to be very high two years back. Today, HTC has a product priced below Rs 10,000," country head with HTC India Ajay Sharma says.

The fact that user interfaces have improved ‘ HTC has focused on touch screens ‘ are only helping matters. In 2007, the firm sold 100,000 devices. This year, it expects to close at 2.5 lakhs.

"Of the 100,000 devices sold last year, 65-75 per cent went to non-business users. That percentage will grow to 75 per cent this year," Sharma predicts.

Texas Instruments believes the market for such phones is being driven by an "insatiable appetite" for advanced multimedia features such as access to media content as well as social networking services. "There is a craving for the hottest applications ‘ advanced audio, high-definition imaging, increased video capabilities, besides rich connectivity. A lot more features can be had in a cell phone today for an incremental price premium and this has been made possible by both technology and adoption of mobile hand phones as a way of life. Typically, the strategy of hand phone OEMs and service providers is to gradually shift the first time buyer of a low cost phone to a mid-range phone and then to a premium phone," director of power management products with TI India Ramprasad Ananthaswamy says.

There is a strong business case for seducing consumers into buying premium phones; it implies better margins for both the handset maker as well as the chip supplier. Advanced application processors, for instance, can generate between $10 and $12 of revenue per phone, double the amount raked in by solutions to low-end handsets.

It is not clearly known to what extent high marketing expenses, which are necessary to introduce high-end phones and its features, offset the margin leverage handset makers manage on such models. The good news, nevertheless, may be shorter replacement cycles for handsets. HTC holds it could be as less as six to nine months in tier one cities and about two years in tier three ones.

Nokia says that until last year, India was a market driven by first time users. "Last year, the number of mobile users was 200 million. By 2009, about 350 million users are expected. Out of that, 200 million would be mobile for more than 18 months. Since the replacement cycle is about two years or less in India, these people would want to change their devices. The replacement market as part of the total market of handsets would therefore become a significant part," Vineet Taneja argues.

Second time buyers are likely to transition to feature-rich phones. The replacement market is being hastened because of economic growth and rising prosperity. "We have only seen the phenomena in a very initial stage," Taneja tells.

What people want

A lot currently depends on what handset providers offer since consumers, at times, are not able to articulate what they want or know what technologies can make it possible. Market research firm IDC says iPhone is pushing handset makers into thinking about better graphic user interfaces as well as music players. ‘Samsung Omnia and Nokia N-96 are the next level of innovative devices and are positioned as iPhone killers,’ communications research manager with the firm Naveen Mishra says.

While many consumers now treat imaging, music, and video as ‘hygiene’, they have been demanding more memory space to store data. Secondly, they crave for larger screen sizes ‘ larger screens facilitates more impact-ful video streaming or conferencing.

From a habit perspective, Nokia has observed smart phone users engaging in a lot of browsing, music, e-mail, and casual gaming. Much of the aspiration around memory and other features are answered in its new N-96 model. The model, which Nokia calls an ‘iconic’ product, has a 24 GB memory that can store up to 18,000 songs, up to 2000 images at 5 mega pixel and up to 60 hours of video or 20 full length movies. HTC is keen on bundling the latest music album as well as games along with its devices. The firm says it already has a big screen-size ‘ the minimum size it offers is 2.8 inches.