His view was that Google was unlikely to keep the organization intact, and they would use it as a prototyping center for the rest of the market. His opinion was that this would be driven from Google’s need to avoid competing with Samsung and others who adopted Android.
I agree with him that it is unlikely that Google will compete with Samsung or any of the OEMs using Android. However, I still believe that Google will prototype devices to premier features that they want the rest of the market to develop, adopt or get behind. It is likely that Google will develop premier features for handsets which adopt specific form factors. These features will be prototyped on Motorola handsets and used as a call to action to drive hardware standardization.
This will enable Google, and subsequently the OEMs using Android to better compete with Apple’s iPhone. With hardware standardization, Google will have better control of the supply chain and it will provide additional leverage against parts providers such as Qualcomm. Ultimately, Google’s Android will gain more traction, and they can eliminate the 5% device royalty that Qualcomm charges OEMs.
In the short and mid-term, Qualcomm will benefit from the overall push to smart phones. The real test will be when these more powerful devices reach ubiquity in the market place…when feature phones in the US and Europe are a rarity rather than 60% of the marketplace. Qualcomm and others will then have to contend with a greater degree of hardware standardization. Hardware standardization will ultimately reduce the leverage that parts suppliers have.
One of the best ways to avoid this scenario would be to identify key features which link software to their specific hardware. This would make them indispensible to the overall software platform creating a barrier to exit. A couple of ideas for doing so:
- Identify key features which link software to their specific hardware. An example of this would be the integration of near field communication capabilities in device chipsets. As handsets make the transition to mobile wallets, close integration of this technology into the Qualcomm chipset will likely protect its value.
- Alternatively, focusing on the secure element aspect of identity storage might yield the same results. In fact, both would be preferable as access to the secure storage on the device and would head off SIM manufacturers from offering the same while at the same time providing companies such as Qualcomm improved influence over the development community who would take advantage of it for their applications.
Of course, all of this has been reinforced by Google’s and Intel’s announcement to partner around Android and the Intel chipset. Today, Qualcomm has the lion’s share of the smart phone chipset business. The partnership announcement is likely to be Google’s attempt to create competition for Qualcomm and lower handset costs. Lower Android-based handset costs translates to better market penetration and additional consumer adoption of Google services….and more data…and better targeting…and so on…and so on. Good news for Intel though.