MediaFile

What happens if smartphones become commodities?

Editor’s note: This piece was originally published at PandoDaily.com. 

Remember Antennagate? Back in the summer of 2010, the brouhaha over reception glitches in the iPhone 4 dominated tech headlines for weeks and led to a class-action lawsuit and a $15-per-user settlement. In retrospect, the controversy seems meaningless, which is why I thought of it amid the current flap over Apple Maps.

Apple will survive the Maps controversy, just as it weathered Antennagate. But there is another trend affecting Apple that the announcement of the iPhone 5 revealed, a larger trend that will take much longer to play out: Smartphones are becoming too similar for their own good.

Only five years after Apple refashioned the smartphone with its touchscreen and its iOS software, smartphones are becoming a commodity. Any must-have feature that distinguishes one phone from the pack is quickly adopted by the pack itself. Fandroids and Apple fanboys will always argue passionately about which phone is superior, but for mainstream consumers, it’s getting harder to see that one brand’s phone is better than the others.

When an industry becomes commoditized, there is less differentiation between the products being sold. Brands stop being so much of a driving force in consumer decision as low price becomes the paramount factor. Lightbulbs are consumer commodities, as are cheap foodstuffs like ramen and staples like salt.

Laptops and desktops have become commoditized over the past decade. It started with Dell, which used just-in-time supplies and customization to make its PCs a low-cost household item. But as others began to replicate Dell’s successful business practices, Dell became just another PC maker. And consumers learned to see that price was really the biggest differentiator among brands.

Today, PC makers like Asus and Lenovo are seeing their market shares rise because they can build PCs at lower costs – and sell them at competitive prices. Dell and HP are seeing their sales fall by more than 10 percent a year. There is still a market for high-performance, well-designed laptops that sell for a much higher price, but it’s largely dominated by Apple and its MacBook Airs and MacBook Pros. So PCs aren’t dying. The bulk of the sales are just becoming consumer commodities.

Smartphones are becoming too similar for their own good. They're turning into commodities, which changes how customers buy them. Brands stop being so much of a driving force in consumer decision as low price becomes the paramount factor. Join Discussion

Apple’s patent victory is a victory for competition

Apple’s resounding patent victory over Samsung in a California courtroom last Friday is a blow to the competition, which now won’t be able copy Apple’s technology. But it is a win for competition. It will force everyone to think harder about turning the unimaginable into the normal.

And that’s what technology innovation is all about.

I am all for intellectual property (it’s how writers make a living) and no particular fan of software patents, which can be vague and overly broad. It’s a very tangled area of IP that in the modern-day tech industry has been a life-support system (think Kodak) and a means of protecting oneself against patent trolls (like that guy who tried to sue the World Wide Web). Patent troves, in the astute description of technologist Andy Baio, have also been weaponized in perverted campaigns to stifle innovation.

Apple and Samsung are duking it out all over the world — some 50 lawsuits in about 10 countries, by one reckoning — in a sort of forever war. Samsung got a favorable ruling just days before in a South Korean court. But the marquee case was the one in San Jose, California, where a jury found that Samsung had violated six of the seven patents Apple sought to defend – three software and three design – and awarded the company $1.05 billion.

The conventional wisdom is that a victory like this for a company like Apple is bad for consumers because it gives a virtual monopoly even more marketplace power.

Dan Gimor, director of the Knight Center for Digital Media Entrepreneurship at Arizona State University’s Walter Cronkite School of Journalism and Mass Communication — and nobody’s fool — presents this case as clearly as I have seen:

…e’re likely to see a ban on many mobile devices from Samsung and other manufacturers in the wake of this case, as an emboldened Apple tries to create an unprecedented monopoly. If so, the ultimate loser will be competition in the technology marketplace, with even more power accruing to a company that already has too much.

Apple's resounding patent victory over Samsung in a California courtroom last Friday is a blow to the competition, which now won't be able copy Apple's technology. But it is a win for competition. It will force everyone to think harder about turning the unimaginable into the normal. Join Discussion

Tech wrap: Apple cares, says CEO Tim Cook

Apple has never turned “a blind eye” to the problems in its supply chain and any suggestion it does not care about the plight of workers is “patently false,” Apple Chief Executive Tim Cook said in an email to employees. Cook was responding to a report in The New York Times about working conditions at Apple’s main contract manufacturer, Foxconn, in China, an issue that for years has been a thorn in the company’s side.

Facebook plans to file documents as early as Wednesday for a highly anticipated IPO that will value the world’s largest social network at between $75 billion and $100 billion, the Wall Street Journal cited unidentified sources as saying on Friday.

Jon Rubinstein, who was instrumental in crafting Apple’s iPod music player, has left Hewlett Packard after two years on the job there. Rubinstein was CEO of smartphone maker Palm when that company was acquired by HP in 2010. He last held a product-innovation role within HP’s Personal Systems Group headed by Todd Bradley.

Samsung Electronics posted a record $4.7 billion quarterly operating profit, driven by booming smartphone sales, and will spend $22 billion this year to boost production of chips and flat screens to pull further ahead of smaller rivals.

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Tech wrap: Era of .yournamehere domains arrives

ICANN, the body that oversees the Internet’s naming system, gave the green light for organizations to begin applying to name and run their own domains instead of entrusting them to the operators of .com, .org, .gov and others. Up to 2,000 applications were expected for the so-called “top-level” international domains. At $185,000 per application, estimated start-up costs of $500,000 and annual running costs of about $100,000, a .yournamehere domain will be out of reach of the smallest companies and organizations. But applications were expected from cities or regions with strong identities, such as .london and .mumbai, from companies aiming to build a business based on new domains, and from community identifiers like .eco or .gay.

Samsung is open to forging an alliance with troubled Olympus, potentially joining other electronics firms in circling one of the world’s biggest names in medical equipment, sources said. Samsung has ruled out any interest in Olympus’s loss-making camera business, but a company source said that it might consider an alliance with Olympus in other areas. Earlier, the Asahi Shimbun newspaper reported that Olympus was scouting for a friendly investor to take a minority stake in the company, and that Olympus had drawn up a short-list of five potential partners, including Samsung, Sony, Panasonic, Japanese medical-equipment firm Terumo, and Fujifilm Holdings.

LG is in talks with various parties on possible partnerships, the head of LG’s mobile business said, as the world’s No.3 handset maker seeks to turn around its struggling handset operation. The  firm, however, remains committed to its mobile business and does not have any plan to ditch the loss-making operation, Park Jong-seok, chief executive of LG’s mobile communications business, told Reuters.

FCC chairman Julius Genachowski said that he had received bi-partisan support from a group of U.S. senators for so-called “incentive” auctions of wireless spectrum without legislative restrictions. Genachowski is looking for approval to give broadcasters a financial incentive to return unused spectrum licenses to the FCC so it can then auction off the spectrum to companies offering mobile data services.

TomTom said an official probe had cleared it of accusations that it violated Dutch data protection laws by sharing its customers’ individual location and traffic information with third parties, including Dutch police. The navigation equipment and map maker came under scrutiny in April after reportedly selling information gathered through its customers’ personal navigation devices in their cars, to third parties, without their consent.

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Tech wrap: Nokia throne in Samsung’s sights

Samsung CEO Choi Gee-sung told reporters in Las Vegas the company overtook Nokia in handset revenue terms in its latest reported quarter and was confident of topping the Finnish group in shipments this year. Samsung’s bullish forecast is in line with some analysts, including Royal Bank of Scotland, but on average analysts have expected Nokia to keep its lead on the market. According to the latest polls by Reuters, Nokia was expected to sell 418 million phones in 2011, versus Samsung’s 320 million, the gap narrowing this year to 388 million versus 359 million.

Google made changes to its search engine, combining content posted by users of Google’s social network Google+ and pic sharing site Picassa with regular search results. Links shared by a Google+ user’s connections are given more weight and will show up in Web search results with a person icon beside them, VentureBeat’s Jolie ‘Odell writes. The changes increase Google+’s prominence online, which is lagging behind Facebook in total number of users.

Sony’s videogaming business, led by its just-launched handheld “Vita”, will prove pivotal in returning the company to profitability, Kazuo Hirai, the executive pegged to succeed Howard Stringer as president, said.

YouTube is looking to increase viewership on its online video service by making the service available on an array of connected devices and by adding new content, according Robert Kyncl, vice president in charge of content partnerships. Kyncl spent 2011 forging new partnerships with content providers to expand YouTube’s offerings. YouTube has also reorganized its website to offer consumers video “channels” to cater to personal interests with an aim to making the site more appealing. Kyncl said that from about 500 content provider proposals YouTube received last year, YouTube had signed on about 100 partners, with whom it shares advertising revenue.

The U.S. government embarked on a rare criminal trial against a publicly traded company, AU Optronics, indicted in 2010  for fixing prices of liquid crystal display panels.  The conspiracy illegally cost the U.S. economy billions of dollars, a U.S. prosecutor said in court on Tuesday. Several other companies, including LG, have already pleaded guilty in the LCD probe, while Samsung cut an early deal to avoid prosecution.

Telecom startup LightSquared is mounting a last-ditch effort to win U.S. regulatory approval for a new wireless network after being outmaneuvered by the GPS industry, which has spun doomsday scenarios of interference problems that could cause planes to fall out of the sky and threaten national security, Jasmin Melvin writes. It is a long shot, analysts say, for LightSquared to overcome the scare tactics effectively sold to lawmakers by the GPS industry. The company is staring down an end-of-the-month deadline for the government to give the green light, before partners start bolting and as its cash position gets more dire, Melvin adds.

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Tech wrap: Samsung savors smartphone supremacy

Samsung Electronics, the world’s top maker of memory chips and smartphones, reported a record quarterly profit, aided by one-off gains and best-ever sales of high-end phones. The South Korean firm posted 5.2 trillion won ($4.5 billion) in quarterly operating profit, beating a consensus forecast of 4.7 trillion won by analysts surveyed by Thomson Reuters I/B/E/S. Samsung, which surged past Apple as the world’s top smartphone maker in the third quarter, only entered the smartphone market in earnest in 2010, but its handset division is now its biggest earnings generator.

Taiwanese smartphone maker HTC recorded a worse-than-expected yearly profit decline in the fourth quarter, and the first decline in two years. The former investor darling shocked markets in November by slashing its fourth-quarter revenue guidance, sending its shares down 28 percent in two weeks and 15 percent to date. Investor concerns linger over whether HTC still has the innovative streak that catapulted it from an obscure contract maker to a top brand.

Sony will promote its consumer business chief Kazuo Hirai to the role of president as early as April, taking the title away from Howard Stringer, who is expected to remain chairman and CEO, the Nikkei newspaper reported. Such a move would give Hirai, 51, who made his name in Sony’s PlayStation video game division, more influence over the whole company and its wide range of technology and entertainment businesses, likely cementing expectations he would succeed the 69-year-old Stringer eventually.

Two weeks after disclosing that its website had been hacked, private intelligence analysis firm Strategic Forecasting warned subscribers that hackers were now circulating false emails offering the company’s services for free. Strategic Forecasting, also known as Stratfor, urged subscribers not to open attachments to the fraudulent emails, which offered subscribers the company’s premium content for free as compensation while it tried to secure its website. Stratfor CEO George Friedman said he deeply regretted any inconvenience caused by the latest incident and said the company was still working to reestablish its data systems and Web presence.

Israeli officials said they were concerned the country may be under cyber attack after a wave of credit card code thefts in the past week by a hacker who claims to be operating out of Saudi Arabia. Credit card company officials said 14,000 numbers had been posted on line Tuesday and another 11,000 Thursday. However, they said some of the codes had expired and that the active cards were all being cancelled.

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Samsung takes the Sony media route with ex-AOL, ex-YouTube hire

Samsung, the South Korean consumer electronics giant, has spent most of the last two decades eating the lunch of rival Japanese electronics giant, Sony.  While Sony has had struggled with all types of existential debates and attacks at home and abroad including, the global hacker attack of its online network, Samsung has gone from strength to strength in setting the electronics agenda with its cutting edge  TVs, phones and tablets.

A lot of Samsung’s success could be put down to be its focus on the basics: making great mass market products and not getting distracted with creating or distributing content. By contrast, Sony not only owns the world’s second largest music company and a major Hollywood studio but also a video games business.

The problem is that Sony has never been able to figure out how to make all those things work in conjunction with its position as one of the world’s largest device makers. Most recently it has launched new online music and video services that it no doubt hopes will help sell more devices. It’s very early to tell if that will strategy will work.

Samsung is now going to try its hand at developing a media platform for content on its devices with the appointment of David Eun as executive vice president. Eun left AOL recently after one of its many restructurings. While there, he was president of AOL Media and Studios. Before that he was the guy charged with doing content deals at Google’s YouTube and before that he was at Time Warner and NBC.

As Samsung says:

He will play a key role in developing a global media strategy and driving new business opportunities to take advantage of Samsung`s growing number of digital televisions and displays, mobile phones, tablets and other connected devices.

 

Samsung is going to try its hand at developing a media platform for content on its devices with the appointment of David Eun as executive vice president. Join Discussion

Tech wrap: “DingleBerry” rings RIM’s security bell

Three hackers said they had exploited a vulnerability in Research In Motion’s PlayBook tablet to gain root access to the device, a claim that could damage the BlackBerry maker’s hard-won reputation for security. The hackers plan to release their data within a week as a tool called DingleBerry. In a response to queries, RIM said it is investigating the claim, and if a jailbreak is confirmed will release a patch to plug the hole. The PlayBook runs on a different operating system than RIM’s current BlackBerry smartphones. However, the QNX system will be incorporated into its smartphones starting next year. The PlayBook in July became the first tablet device to win a security certification approving it for U.S. government use.

Samsung is set to resume selling its Galaxy tablet computer in Australia as early as Friday, after it won a rare legal victory in a long-running global patent war with Apple. An Australian federal court unanimously decided to lift a preliminary injunction, imposed by a lower court, on sales of Samsung’s Galaxy Tab 10.1 — but granted Apple a stay on lifting the sales ban until Friday afternoon.

Groupon’s shares rose after CEO Andrew Mason emerged from the company’s post-IPO quiet period to share holiday sales numbers. Groupon sold more than 650,000 holiday deals between Black Friday and Cyber Monday, an increase of 500 percent compared with last year, Mason said in a blog post. Groupon closed the trading day up 9.3 percent $17.50.

Japanese authorities may take weeks to make any arrests over the accounting scandal at Olympus, though initial findings by an investigative panel of experts are due to be released in days, lawyers said. Even if criminal complaints are filed against former executives or others involved in the scam, which dates back two decades, arrests might not take place by end-year. This is partly to allow both suspects and prosecutors to spend the new year’s holidays at home, since the turn of the new year is Japan’s biggest traditional holiday, akin to Christmas in the West. Suspects can be held for a total of 22 days before either being indicted or released.

Toshiba said it would close three of its six discrete chip-making facilities in Japan and also trim output of certain types of chips over the year-end as demand for PCs and TVs slides in the U.S. and Europe. Discrete chips are relatively simple semiconductors used in a wide range of electronic products from audio-visual equipment to cars and mobile phones. The three plants are scheduled to be closed in the first half of the fiscal year starting in April 2012, in a bid to slash costs, with Japanese makers at a disadvantage because of strength in the yen.

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Tech wrap: Is intellectual property being used to restrict competition?

EU regulators investigating Apple and Samsung over their patents dispute are worried intellectual property rights may be unfairly used by some firms against their rivals, the EU antitrust chief said. “We need to look at this because IP rights can be used as a distortion of competition but we will need to look at the answers,” EU Competition Commissioner Joaquin Almunia told reporters. “Apple and Samsung is only one case where IP rights can be used as an instrument to restrict competition,” he said.

Netflix’s shares dropped as much as 7 percent after it warned of a loss for 2012, a move that prompted several Wall Street analysts to cut their price targets for the online video and DVD rental company. Netlfix said that it had recently lost a “significant” number of customers, who objected to Netflix’s decisions to raise its prices and split up its streaming and DVD business — an idea it later dropped. “If we do not reverse the negative consumer sentiment toward our brand, and if we continue to experience significant customer cancellations and a decline in subscriber additions, our results of operations including our cash flow will be adversely impacted,” Netflix said. Netflix shares ended the day down 5.4 percent at $70.45.

Groupon stock slumped on concern about increased competition, leaving shares of the largest daily deal company close to their $20 initial public offering price. LivingSocial, Groupon’s closest rival, announced plans on Monday to offer 20 deals with national merchants on the crucial Black Friday shopping period. Groupon shares ended the trading day down nearly 15 percent.

Samsung Electronics, the world’s top TV maker, is in last-stage talks with Google to roll out its Google TVs, the head of Samsung’s TV division told reporters. Samsung in January displayed a new Google TV-enabled Blu-ray player and companion box at the Consumer Electronics Show, but did not commercialize the offerings. The company said it plans to unveil its Google TV at an event next year without elaborating on the schedule.

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Samsung is calling fine artists

Samsung is going bodly where few major electronics companies have gone before — the fine art market. The Korean electronics giant is developing a new high resolution LCD screen for displaying artwork electronically in homes and offices. These “new digital canvases”, as Samsung puts it, will help the company tap into the $60 billion annual art market, one third of which is based in the United States.  “It’s very significant market opportunity,” Scott Birnbaum, vice president of new business development for Samsung Semiconductor, said in an interview.  The concept of electronic art has been tried before but has not really taken off, mostly because of the poor appearance and lack of availability of digital paintings.   Samsung said its screens would have more real-life colors and would support brushstroke-like texture.  A major supplier of Apple for everything from flash memories to processors, Samsung is working with digital signage company Planar Systems, which will be distributing the framed LCD art screens.  Planar plans to launch the product next year.  Another set of conversations is also taking place between Samsung and budding artists to encourage them to try the digital realm. Samsung wants to build a cloud-based art collection and needs the artists to license their work for it.  Maybe artists will now start thinking in terms of pixels rather than just brush strokes.

An example of Samsung's digital canvas Join Discussion