Can Surface Rescue Microsoft’s Mobile Plans?

windows mobile handsetWhat is Microsoft’s future in the mobile space? It’s a question that’s generated more than a few column inches over recent years. Now with Redmond agreeing to sell the feature phone division to Foxconn and licence the Nokia name, things have perhaps started to get a little clearer.

First, the bad news. IDC is predicting Windows Phone’s market share for 2016 will stand at just 1.2% this year – that’s down from 2% last year, 2.7% the previous year, and 3.3% in 2013. The firm is clearly not getting any OEMs on board for future devices anytime soon, and there was no mention of new Lumias in the Foxconn announcement – just that it would support current devices. From this – and speaking to a few experts for an upcoming feature – I think the smart money’s on a Surface handset.

Surface has done pretty well in the tablet/laptop space – albeit after a few iterations. And a high-end Surface handset would show off the best features of Windows 10 Mobile, as Microsoft finally harmonises its OS across all platforms. It could have crack at competing with the Samsung Galaxy range and potentially the iPhone. Whether this is enough to prop up Microsoft’s mobile hardware business is unsure, however, and more job cuts could be on the way.

A Surface smartphone could appeal in particular to business executives and the like, according to IDC analyst Susana Santos. “It’s a strategy that makes sense, but it takes time. It’s too early to say if it’ll work or not. It certainly won’t help with its volumes. These devices are more expensive and not as easy to sell,” she told me.

With the business market set to rise only to 20% of the global smartphone market, according to IDC, this is also a concern if Microsoft can’t persuade those BYOD consumer/employees to migrate away from their iOS or Android handsets. It’s been said many times before, but Microsoft is in many ways still a victim of its lack of vision a decade ago, which let Apple and Google steal the hearts, minds and wallets of consumers.

And what of its chances of getting those sought-after OEMs on board?

“Of all companies, Microsoft knows the value of a developer and application ecosystems, but has been poor to drive this agenda in the mobile realm. I’d expect it to continue with Windows phone, but play mostly in the higher-end,” Quocirca’s Rob Bamforth told me by email. “The words it has used seem to indicate an interest in mobile computing devices, with telephony capabilities, rather than emphasis on ‘handsets’, so I think that means higher-end pricing and positioning – and perhaps a closer connection to Lync/Skype for Business and Skype Meeting. Perhaps we might be looking for a Skype Surface.”

The question is whether Redmond can maximise its IP and engineering talent in this space, “gluing the bits together in a way that Apple seems to mange elsewhere”, according to Bamforth. If it can, it’ll be the greatest comeback in the history of computing.

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Why Lenovo can’t launch its phones in the US yet

lenovoLenovo is the number one PC maker in the world and rapidly gaining popularity in the smartphone space, where it’s second in China, yet it’s been forced to delay its planned entry into the US mobile space by up to 3 years.

Reports from CES last week had Lenovo execs lowering expectations in front of the media rather than the usual ambitious predictions and bravado that characterise the world’s biggest consumer electronics show.

As I reported on The Reg, CEO Yang Yuanqing predicted last May that the firm would launch a phone Stateside within a year.

However, at CES Lenovo’s Americas president Gerry Smith told journalists it could be another 2-3 years, and that the firm was waiting for the “right time”, the “right product” and looking to boost marketing/branding spend first.

It’s certainly a given the firm will eventually take on Apple in its own back yard, but with PC sales tanking globally, why such a long lead time?

I spoke to some local analysts to find out.

IDC’s Melissa Chau argued that it comes down to brand recognition and industry partnerships.

“The biggest challenge any smartphone player has in breaking into the US has to do with partnerships. Even Nokia found it a problem building the right relationships with carriers and I wouldn’t be surprised if Lenovo is finding the same,” she told me.

Lenovo needs also to find a unique selling point – something to differentiate it from the likes of Huawei, ZTE and others which have already shown they can produce decent handsets for US punters at low cost.

Canalys analyst Jessica Kwee was more optimistic, arguing that Lenovo already has good brand recognition thanks to its Thinkpad laptop line.

“Lenovo is one of the most well-known Chinese brand with a good brand image even in the US, which may help it do better than some of its Chinese peers when it does launch its smartphones there, although there are plenty of other reasons that will help determine its success, such as the products, channels, marketing and timing,” she told me.

In the end there’s nothing wrong with a company like Lenovo taking its time before launching into an important market.

But I have a feeling that it will make a move sooner rather than later. Giving your rivals – especially Chinese ones like Huawei – a 2-3 year head start is never wise, let alone in a fast-moving and highly competitive space like the US smartphone market.


No shanzhai please, we’re Hong Kongers

sincere podiumOne of the most frustrating things about being a Hong Kong technology journalist is having people ask you what the next big tech trends are; what kind of weird and crazy gadgets you’ve managed to track down, etc etc.

The truth is, as I’ve discovered over the past 18 months, despite its famously futuristic neon-kissed city-scape Hong Kong is not where you’ll find such weird and wonderful or early adopter technologies. They don’t even really exist in Japan’s famous Akihabara “electronics town” district either – a spot now filled with maid cafes and adult video shops.

The truth is that for pimped out shanzhai goods like these, you’ll need to go to Shenzhen, just across the border from Hong Kong.

This city, and its Chinese neighbours around the Pearl River Delta, has always been the epicentre of cheap, sometimes illegal but usually grey market goods – whether they be recognisable brand name items assembled or sourced from non-official channels, or white box weirdness from tiny makers you’ll never have heard of.

It’s not as if, as I originally thought, there has been a government crackdown on these items in Hong Kong. You see, they’re not technically even illegal – it’s more market driven than that.

“In Hong Kong the government is not banning these products, it’s that the market is not that big,” Frost&Sullivan analyst Lu Shuishan told me. “Some people are willing to pay relatively low prices for shanzhai goods but the market presence of branded products is just bigger.”

People can afford better quality goods in Hong Kong without breaking the bank, unlike in China where an iPhone can cost a months’ salary and grey market versions of the big brands are sought out by virtue of being cheaper, he added.

According to Forrester’s Bryan Wang, Hong Kongers also benefit from buying more of their phones through operators than direct from retail as in China, with two year contracts boosting their affordability whilst locking punters into lengthy terms.

That’s not to say white box goods have completely disappeared from Hong Kong. On a trip to Sincere  Podium – a three floor mecca for smartphone fanatics in Mong Kok – there were one or two brand names I’d never heard of, like Copicell, Daxian and Shouyue.

However, there were no unusually specc’d shanzhai products, of which Western readers are inordinately fond.

As IDC senior market analyst Dickie Chang told me, skyrocketing local rents are also focusing the minds of traders.

“Dealers need to pay more to cover rental costs, so they will need to think carefully about the products
they want to sell,” he argued.

It seems that the era of the weird and wonderful shanzhai handset, at least in Hong Kong, is well and truly over.


No news is bad news for Apple in China

chinaSo there it is. Apple’s much publicised Beijing iPhone launch event ended. With no news.

It appears that the fruit-themed company, while claiming that China will be its biggest market soon, does not believe it’s THAT important. At least yet. All the poor hacks were offered was a video of last night’s US launch. Ouch.

More importantly for Cupertino, the prices it has stuck on its new 5C and 5S devices will mean only the most hardy fanboys and girls will want to buy them. The iPhone 5C is definitely not budget, so it will fail to appeal to the mass low-end market currently consuming smartphones in China and India like there’s no tomorrow.

A 5C will retail for between 4,488 and 5,288 yuan ($733-864, £466-549). Compare this with the price for the high-end 5S in the US ($649-849) and you can see why some commentators reckon it will fail in the PRC.

It’s certainly not enough to beat Xiaomi’s impressively spec’d Mi-3 at 1,999 yuan ($326).

Forrester analyst Bryan Wang told me that it needs to come down to 2,999-3,499 yuan in order to “eat up the market share” of the likes of Huawei, Lenovo and Meizu, but that at present prices, the local Android players will be “really relieved”.

However, Apple is likely to have left itself some breathing room. It’s plan? Test the market out with these inflated prices and then “lower the price after a couple of months”.

Apple’s other hope of gaining much needed market share in China come from a possible tie up with the world’s largest operator, China Mobile, which has over 700 million subscribers.

No announcement was made at the Beijing press “conference” today but Wang believes it will come, when the carrier has a 4G network to announce. The reason? The 5C and 5S both support TD-LTE, a standard China Mobile helped to build.


APAC the key to Micr-okia success

asiaIt was Microsoft and Nokia’s big week this week and I’m sure the two will be hoping to hog the headlines going forward as much as they did over the past seven days. Now some might have unkindly described the alliance as “the sounds of two garbage trucks colliding”, but I’ve been getting the low down on why the deal should matter to APAC, or more realistically, why APAC should matter to Microsoft.

Let’s get one thing straight, APAC is essential to Microsoft’s future success in the smartphone space, not just because it has the world’s largest and fastest growing market – China and India respectively – but because Nokia has a really good legacy footprint there thanks to its feature phone biz.

The problem for Redmond, however, is that we’re not talking about feature phones any more, but smartphones. These markets are increasingly demanding smartphones, albeit low-end handsets, not feature phones. It’s why local players like Huawei, ZTE, Micromax and others are growing at such speed.

Nokia’s stock is greatest in India, where it has been voted most trusted brand for two years in a row, despite on-going tax problems with the authorities. Yet according to IDC’s Melissa Chau its relationship with operators isn’t particularly great anymore, so to large extent Microsoft is going to have to start from scratch here.

Building a budget Lumia will be vital and Chau told me Microsoft could do two things to help achieve this:

  • Remove licensing charges – at the moment it’s built into the cost of the phone – which would wipe about $10 off per handset
  • Use its combined internal expertise now with software and hardware to tweak Windows Phone so that it can run on hardware specs more suited to a lower price point.

It also needs to sort out Asha, she told me, starting with making the handset more attractive by sticking some Microsoft apps on it, and then hopefully in time transitioning those customers to a low cost Lumia.

This ain’t gonna be easy. The competition is fierce out there and with Nokia’s star waning and a severe lack of apps in the ecosystem the best Redmond can probably hope for is cementing it in third place behind the deadly duo of iOS and Android. With four of the Lumia’s top selling markets in APAC (including no. 1 and 2) however, it must make the region a priority.

Time will tell how successful it is, of course, but time, as we all know, is probably something Micr-okia doesn’t have.


Computex 2013: chips with everything

windows OEM devicesSo that was Computex Taipei 2013. Asia’s largest IT show and the world’s second biggest was dominated this year by the launch of Intel’s 4th generation Haswell processor family, and to be perfectly honest there wasn’t an awful lot of other news knocking around, but here’s my brief take on events.

Local heroes Asus and Acer kicked things off in usual hyperactive fashion with a bevy of tablets, notebooks, smartphones and other hybrid devices. The most notable was probably Asus’ 3-in-1 Transformer Book Trio, which combines a notebook, tablet and even desktop functionality in one.

Acer’s presser was more subdued and it remains to be seen whether it’s done enough to win back some of the market share it’s been hemorrhaging over the past few quarters. It actually also depends on whether users decide they want 2-in-1 notebook/tablets – as Intel believes they do –  or a regular notebook with a smaller companion 7 or 8 inch tablet (phablet) device like the Acer Iconia W3.

How this market shakes out will be interesting to watch and to be perfectly honest no-one knows how it’s going to play out, least of all the many analysts I spoke to. It’s all about price, performance, and user experience – nail those three and as a manufacturer you’re giving yourself the best chance of success. Intel was marketing the hell out of the 2-in-1 concept at the show on the back of its Haswells and Silvermont Atoms, but I’m not convinced this will work out as intended.

It makes sense on paper – a tablet for tablet stuff and a notebook for work, in one hybrid device – but if you’re a fanboi, for example, you’re not going to want to give up your iPad, so a convertible isn’t going to cut it.

Form factor chat aside, Microsoft held its first public demo of Windows 8.1  at the show – the OS Windows 8 should have been. There are a lot of cool features in there – better search, the ability to view several apps on one screen and resize them, and the long awaited return of the Start icon. However, the experts are pretty guarded about whether it will be enough to a) rejuvenate the PC market and b) help Redmond grab more market share in the mobile computing space – tabs, phabs and notebooks.

“Being able to lock it in desktop mode and having a ‘Start Point’ will remove the chief barriers that people have with Windows 8. But that doesn’t necessarily address the things that are holding back the PC market as it is,” Forrester analyst David Johnson told me.

“Right now, at the consumer and enterprise level, non-Windows tablet adoption is massive, and Windows 8.1, while improving the tablet experience, will still be competing with Apple iOS and Android. Secondly, most enterprises are completely distracted by just getting to Windows 7 before the April 2014 deadline. They’re at capacity with that transformation and few will have the resources to worry about Windows 8.1.”

Taiwan was quite honestly the star of Computex this year.

I mean, it always has been, but the lack of news made it even more obvious. This is a country whose technology producers account for 80 per cent of the global “branded” tablet market and over 90 per cent of Intel notebooks. They might all be physically made in China but they’re designed here. The IP, basically, is Taiwanese.

It raises an interesting point about whether the People’s Republic of China can ever hope to emulate its tiny neighbour the Republic of China. The Communist Party desperately wants it to start innovating, but you can’t just turn on that tap at will after decades of stealing and copying IP.

Rubber ducks perfectly illustrate just how far it has yet to go.

Hong Kongers have been fawning over a new installation from Dutchman Florentijn Hofman for weeks now. It’s a giant, six storey, yellow rubber duck floating in Victoria harbour.

Now reports have emerged that similar ducks have been spotted across China, from Wuhan to Xi’an. They say imitation is the sincerest form of flattery, but in the tech world, it’s going to get China absolutely no-where.


Lenovo will struggle in US smartphone market … for a while

lenovoLenovo has been talking up its move into the US smartphone market this week, as global PC sales continue to stagnate, but the analysts I spoke to are far from convinced that the Chinese hardware giant can repeat its success in the traditional computing space.

CEO Yang Yuanqing told the WSJ that the firm would be taking aim at the US mobile space within a year. You can’t argue that it doesn’t represent a “new opportunity” for growth, given that PC shipments are still falling in most markets around the world.

In Western Europe they declined by the biggest ever amount in the last quarter – down 20 per cent year-on-year – and even in the still healthy Chinese market they are only forecast to grow by 3-4 per cent this year.

So can the hardware behemoth, which recently became the world’s number one PC vendor, tap a user trend which is seeing more and more gravitate towards mobile devices instead of traditional notebooks and desktops?

Well, Gartner has forecast it will take the lead in its domestic market – the world’s biggest for smartphones – as early as this year, but the US would seem harder to crack.

“The only way Lenovo would have a way to even have a chance would be to have a key carrier support it by lining up one or more of their products in the portfolio. Even this way, I believe consumers will not necessarily see the brand as sexy,” Gartner research VP Carolina Milanesi told me.

“Lenovo’s position in the corporate PC market might give them an opportunity in the prosumer segment especially if they brought to market an Android based device with an enterprise class security and manageability feature set. Bottom line: it’s a tough job and Lenovo would be better off capturing more of the tablet market first so that they could get one step closer to consumers.”

Canalys research director Nicole Peng was not much more optimistic of its chances in the near term, telling me China sales would continue to make up the majority of its global volume.

“The competition landscape in the US smart phone market is far more challenging for new comers, with Apple and Samsung dominating over 70 per cent share,” she added. “However to start selling smart phone in the US, more importantly to gain carrier support is strategically important for Lenovo’s overall PC+ strategy globally.”

All reasonable comments and I think they’ll be true in the short term, but I wouldn’t be surprised to see Lenovo up there in the top three or five US smartphone vendors in a couple of years’ time. ZTE, with all of its problems and negative publicity in the US, has already nabbed third place, according to new stats from ITG Market Research.

With a hefty R&D team and vaulting ambition, Lenovo will be hard to ignore, even if its brand image is not exactly an enticing one for smartphone users Stateside at the moment.