Gone are the days when the chip was hidden deeply and anonymously within a device. Intel changed that with ‘Intel Inside’, achieving consumer awareness for its PC processors. Major mobile silicon providers are trying to pull off the same trick, seeking to persuade developers and even end users that a handset with their chip inside will be superior. Some of this will be attempted through pure marketing muscle, but the other technique will be to integrate key applications at silicon level, shifting the differentiation ‘ and the value ‘ towards the chip.
This was seen this week in a deal by mobile collaboration and content sharing firm Box, to preload its services on Android and Windows Phone devices powered by Qualcomm’s Snapdragon processor. This is an example of a popular application being courted directly by the chip provider, not the device vendor, to make its SoC more appealing than those of rivals.
In fact, the main thrust of Box’s announcement was about the introduction of a WP7 version of its free app, and this reflects another aspect of the multifaceted alliances between chip, OS and applications suppliers within a smartphone platform. Qualcomm works more closely with major software houses than any other mobile chip firm except Intel, and has famously come close to usurping Intel’s privileged status with Microsoft ‘ the smaller firm remains the only one with a mobile processor optimized for Windows Phone. It is taking advantage of this headstart to enrich the platform with tied-in services as well as enhancements like fast browsing technology. The result ‘ a monopoly on the admittedly fledgling WP7 base, and increasingly high barriers to entry for rivals, at least when targeting the higher end of the phone sector.
Qualcomm and others want to enrich their platforms and avoid the commoditization seen in lower end mobile chipsets, but they also aim to dilute the power of the handset OEM, and come closer to the situation seen in the PC world ‘ where the controllers of the OS and the processor dominated the market, not the product manufacturers. The deepening ties between Qualcomm and Microsoft, and Intel and Google, do not bode well for the influence that handset makers can exert on future directions. Of course there are exceptions. Apple and Samsung have huge brands and massive control over their supply chains and software. But the activities of the silicon suppliers point to a balance of power shift within the handset and tablet ecosystem, and an attempt to create new ‘Wintels’ in the wireless era.
Qualcomm and Intel have the best shot, but others are trying, cultivating their own software differentiation. Qualcomm and Nvidia are locked in a battle to convince games developers that their graphics-centric platforms are essential to the best experience. Qualcomm recently released GamePack, a set of over 100 features and apps for this sector, some exclusive and all optimized for Snapdragon. That echoed the strategy of Nvidia with its TegraZone storefront for games optimized for its Tegra processors. Such platforms may be presented as a value added service for the chip vendors’ OEM customers, giving them a new way to lure users to their gadgets for no investment on their part. But the main aim is to carry off that rare trick of getting consumers to demand a technical feature by brand rather than as a generic, having been convinced it will deliver a unique capability (Intel is the master, first pushing customers to demand ‘Wi-Fi’ rather than just ‘wireless connection’, and then to believe its own Centrino badge was the most reassuring way to get that).
Liat Ben-Zur, Qualcomm’s senior director of software strategy, told GigaOM recently that Qualcomm is increasingly appealing directly to developers through initiatives like the new Snapdragon SDK (software developer kit) for Android, previewed last month. That will be the route to turning Snapdragon into a desirable brand for consumers, by combining high profile applications with the hardware functions to boost their performance ‘ such as advanced in facial recognition or 3D.
‘That’s the point I want to get to where you hang out with a buddy and you have a Snapdragon phone and he doesn’t and you both have the same app. When you use the app, you have extra options and features and your buddy starts wondering why he doesn’t have that. And the next time he buys a Snapdragon phone,’ Ben-Zur said. Of course, Qualcomm not only lures developers with promises of an advanced multimedia platform, but with its established ties with carriers and hardware makers.
Some are going further than SDKs, and embedding services right into the chip, as with Qualcomm/Box. This is particularly seen in the high growth affordable smartphone segment, targeted at emerging economies where users want simplicity of use and full web capabilities at low cost. MediaTek and Spreadtrum have both been highly active here, differentiating their smartphone and featurephone chipsets not by expensive hardware functionality but integrated software.
For instance, late last year MediaTek promised sub-$50 featurephones with embedded courtesy of a collaboration with the social network. The Taiwanese firm is trying to move into higher value markets, and has several important software partnerships. These are all geared to creating reference platforms, in which web services are combined with, and optimized for, low cost chipsets. These can then be used by low cost phonemakers to create models which appeal to web users, at low cost and time to market.
Among MediaTek’s existing strategic partners for mobile services are Yahoo and Microsoft. It embeds mobile internet services using its MAUI runtime environment (MRE), a middleware technology designed to help developers deploy services and content on what MediaTek calls ‘smart featurephones’. Yahoo was the first web apps partner for MAUI, embedding Yahoo Mail, Messenger, Flickr, News, Weather, Finance, Cricket and Answers. The platform targets featurephones, Java and Android.
Microsoft is more active in the ultra-low cost space than many believe ‘ it has its own alliance with MediaTek to drive Windows into emerging markets and has initiatives such as the OneApp platform for bringing smartphone-like software to featurephones. These could well be harnessed by Nokia which, despite recent setbacks, still has considerable influence in emerging economies.
But differentiating in the high end smartphone, where growth is slowing and chip vendors need to steal market share, is the biggest current trend. The problem with such activities is that consumers really have no way to test whether ‘Intel Inside’, ‘Centrino’ or ‘GamePack’ really do deliver benefits or are just marketing slogans, yet tactics like Qualcomm’s and Nvidia’s can further fragment the already confusing Android apps base. We have different apps working optimally with different releases of the OS, and less well (or not at all) with others; the same applies to different skews of Android, such as Amazon’s or China Mobile’s; and now there could be different quality of experience for the same Android games running on Snapdragon, Tegra or other processors. The result could be confusion and disappointment among mobile users ‘ and by implication, a win for the homogeneous Apple platform.
ARM contines to ride the smartphone wave
ARM continues to grow on the back of the dominance of its processor architecture in mobile devices. The UK firm said its IP powered 2bn chips during the second quarter, up 9% year-on-year even at a time when shipments across the whole chip industry are down 4%.
That reflects the growth in smartphones and other mobile gadgets, about 95% of which ARM-based processors, and also ARM’s move into new sectors such as low power servers and the embedded space. ARM’s processor royalties were up 14% compared with 2Q11 compared with an industry-wide revenue decline of 7%.
The company’s Q2 revenues were $213m, up 1.7% from Q1 and 12% year-on-year. Pre-tax profit rose to £66.5m ($103m), up from £50.7m ($80m) in the year-ago period.
‘ARM’s royalty revenues continued to outperform the overall semiconductor industry as our customers gained market share within existing markets and launched products which are taking ARM technology into new markets. This quarter we have seen multiple market leaders announce exciting new products including computers and servers from Dell and Microsoft, and embedded applications from Freescale and Toshiba,’ said CEO Warren East in a statement.
East said the firm was entering the second half of the year with a record order backlog and expects to achieve a small sequential increase in royalty revenue in the third quarter, though he said visibility for Q4 was difficult, due to macroeconomic uncertainty. CFO Tim Score commented: ‘When you’re planning forward, you’re likely to be a bit more cautious,’ adding that smartphone growth could be ‘a little bit muted than where they’ve been previously’.