Replies to post #8475 on Qualcomm Inc (QCOM)

[kechuwa3]

What's in a Name?

3-10-2004

Handset brands may not sell as sweetly in 3G

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According to research from Nomura Bank in London, the margins of brand name handset manufacturers will come under pressure as 3G gains ground.

“Competition is going to be much tougher as the operators have found that they have the power to wrest some brand value back from the vendors,” says Richard Windsor, an analyst with Nomura. “The Japanese vendors, who have low brand aspirations and are ready with 3G technology, are more than willing to meet the specifications for operator-branded user experiences,” he points out.

This means that if the big brand names want to maintain their market share, they may well have to give a little on margin. Some vendors are already in discussions with white-label manufacturers, as Mike Short, vice president of mmO2, the UK-based mobile operator, admitted last week. “Yes, we have talked to handset vendors about stripped-down handsets. There will probably be OEM white-label manufacturers making them soon,” says Short. “We could start to see the US$50 handset within reach,” he adds.

Windsor argues that both handset vendors and operators need to command brand loyalty if they are to avoid commoditization and that the power of the operators is on the rise. Nomura expects white-label, operator-specific terminals “to grow rapidly.” Japanese vendors, in Nomura’s view, have the most to gain from this development while Nokia, currently the market-leading handset manufacturer, has the most to lose.

-- Ouida Taaffe