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« Its Now Official, Nokia Shareholders Approved the Deal | Main | So Previewing Smartphone Bloodbath Year 5: Who Is Still Left Alive »

November 20, 2013

Comments

Winter

@Boron95
I think LeeBase gives an insightful account. You are just trying to "blame the victim". Where the victims were weeded out by "market forces", bad management, and inter company warfare.

B aron 9 5

@Lee "You only omit the notion that Nokia WAS indeed "all that". They thought they were the best -- because they were."

I completely and totally disagree with this. And that may be the main difference. I'm totally convinced that, even without the smartphone revolution, Samsung (and to a lesser extent LG, the Chinese OEMs, etc) would undercut Nokia.

That is my whole point. Nokia was a GSM-ETSI-UMTS induced bubble company in mobile. They would have about a 10-15 year run at the top, regardless of smartphones.

How can you claim Nokia was the best in 2007 when they had near zero share in the largest phone market (by value) in the world (US) and ZERO share in the second largest market in the world (Japan)?

They were FAR from the best. They simply were the biggest in the GSM-UMTS markets. Period. That is ALL you can say based on the data. In the markets where the technology differed even slightly (W-CDMA in Japan vs full UMTS), Nokia had ZERO share. Zero share in South Korea as well.

Show me ONE example where Nokia was the best in a non GSM-UMTS market.

I'm sorry but your conclusion that Nokia was the best is completely at odds with the data. A global leader is competitive in the top markets. It doesn't hide from them.

Nokia was simply the largest GSM-UMTS handset company. Not the best. And Samsung would pass them eventually, even without the advent of Smartphones.

E.Casais

At least LeeBase provides a sane appraisal of the forces that moved the mobile market, of the strengths and weaknesses of the main players, and of the required conditions for the emergence of the new breed of mobile devices. No nonsense conspiracy theory about some "GSM cartel" imposing its norm and its manufacturers on the hapless world.

A few additional points that I believe need some emphasis:

1) Nokia and Ericsson were not just lucky firms benefiting in their comfy position from the 2G and then 3G norms defined by ITU-T/ETSI/3GPP. They already had a proven track record in building and selling mobile terminals and mobile networking equipment with 1G (NMT) in the 1980s; Ericsson had even been world leader in mobile terminals and networks since the 1970s (Mobitex). They were _not_ incompetent nobodies that needed to be artificially prepped up by a cartel. Same with Apple: it had a long history of designing and implementing OS and UI -- which were the key elements when the new generation of smartphones arose (and which, for instance, Samsung did not have and had to look for at Google). All those firms had a long history that explains a large part of their success (and failures).

2) Had Apple (and other IT firms) attempted to produce a device comparable to the first iPhone much earlier, they would have have probably failed. Not because capacitive displays were not available -- they could have used resistive ones, or keypads, whatever. But 128-256 MB RAM would have weighted something like 100$ in the BOM alone (something like 10 times the current BOM for RAM in an iPhone). Not to mention the cost of flash storage. Data communication in mobile networks was slow and expensive (CSD/GPRS/EDGE) -- forget about clouds and downloading heavy software packages. WLAN on a mobile? Way too ghoulish in terms of battery power. In order to develop any service for mobile devices, one had to do it in a different way than traditional IT/Internet approaches. The results were actually remarkable -- Japan had in fact the best and most advanced ecosystem in this respect (browsing, payments, digital content, games, text and video messaging...) -- because of the fragmentation in the US market, these services did not take hold there. Disparaging that appears to me as vacuous as disparaging OS/360, VMS or CP/M environments when we have such advanced OSX, Linux or even Windows-7/8. It is pointless: technology has to move through different stages, and software follows hardware limitations -- the problem with Nokia & co is that they could not move to the newer stage.

3) The idea that the advent of Android/iOS wiped out the old guard is only partially true. The field of mobile was already littered with defunct, once relevant mobile terminals companies that did not make it. Siemens, Sagem, Sendo in Europe; VK Mobile, Innostream in Korea. Competition was harsh; if Nokia, HTC and Samsung survived, it is because they were really good at what they were doing (and became arrogant, as every successful company does).

4) GSM/UMTS facilitated a unified market in Europe, then the world, and this was an initial competitive advantage for Ericsson and Nokia. There is no question that the fragmentation and the absurd frequency allocation in the USA (what was that corporation that sat on its wireless bands, unused, for 10 years before selling them?) hampered mobile there. It is interesting that the advent of iOS, Android (and WP) goes in parallel with the the progressive abandonment of proprietary wireless technologies -- iDEN, CDMA, WiMAX -- in the USA, and the unification around HSPA and LTE.

Again, I exhort Tomi to reserve his reflections on the Nokia saga to his book, and start discussing what is happening in mobile around the world.

B aron 9 5

@E.Cassais - You are so wrong. What you think were strengths were actually artificial barriers the bred complacency.

DoCoMo grew a walled garden ecosystem because of the virtual monopoly that was awarded to it by the government. The fact that no walled garden existed in the US was a positive. It meant that all US firms - Palm, Apple, Google were focused on bringing the ENTIRE INTERNET to the phone. You don't get it. It is the very fact that Silicon Valley companies were excluded from GSM-cartel, and DoCoMo iMode that gave them the energy to put the entire Internet in your pocket. They were outside the club. They had to smash the doors, not just play nice.

And GSM-ETSI was no conspiracy. I don't believe in conspiracy theories. It was lobbied, paid and bought cartel. Simple as that. If I was running Nokia or Ericsson at the time, I'd have hired and paid the same lobbyists.

There is nothing wrong with it.

EXCEPT

If you become complacent and too full of yourself.

Tomi and you and many here, for years said "who cares about the US market", "US is backwards, they use email instead of SMS", "CDMA is a loser".

If I was running Nokia, I'd be relentless - "Why can't we lead in the top two markets in the world at the time - US and Japan". Not figuring that out was a total failure. A failure that comes with a cartelized comfortable position and arrogance.

I'll guarantee you, if Nokia had figured out how to be a leader or even a strong player in the US, Japan and South Korea before 2007, there is no way that Apple and Google would have fought it so flat footed. No way.

Same with DoCoMo. If it had figured out how to play with Facebook and Google and PayPall etc, etc it would not have lost its entire ecosystem and have to cave in to Apple and Google.

It is not enough to be the biggest. You need to understand why you are the biggest and understand that being biggest doesn't make you better.

Samsung and Google and ARM understand that. The are actually paranoid and even have a bit of an inferiority complex. Nokia, Ericsson, DoCoMo, Alcatel, RIM, Sony, were full of themselves, and are paying a horrific price.

Apple and Qualcomm are a bit arrogant, but somehow they keep the goods coming. I worry a bit that they are getting to arrogant, but they somehow always surprise me on the upside.

B aron 9 5

Happy New Year - Hope we can start the new year discussing something other than Nokia.

Lost of excitement ahead.

What form should wearable technology take? Should an iWatch or GoogleGlass be an independent device or a companion device?

Should your car entertainment and navigation run from your iPhone via AirPlay, or should automakers continue to add intelligence to in-can entertainment systems?

Is the smartphone the perfect e-wallet and miner for crypto currency?

When will tablets eclipse laptop PCs?

When will TV's have the built-in computing power to compete with Playstation and Xbox-class consoles?

When will HEVC and 4K displays reach mainstream and OTT services?

What are the implications of the 14nm/300mm wafers technology coming on line in 2014? How many of those $5B Fabs will there be in the world?

Can electronics assembly be automated to return to low energy cost, mid-wage countries like the US?

Winter

@Boron95
In short, your questions seem to revolve around the next consumer hype? A different exciting point is the question when the majority of humans will have internet access? That will have far bigger effects.

Wrt your last questions, jobs will return to the USA when the wages there have fallen below those in the poorest countries. There is zero incentive in the USA to supply an income to residents.

E.Casais

"if Nokia had figured out how to be a leader or even a strong player in the US, Japan and South Korea before 2007, there is no way that Apple and Google would have fought it so flat footed."

Palm had been mortally wounded by HTC PDAs long before HP bought it. The 2004 RAZR was Motorola's last hurrah. These US firms lost the competition in the world market. Where were the UTStarcom, Kyocera, and Sanyo so present in the USA? Where were the Casio, Fujitsu, Hitachi, Mitsubishi, Sharp so predominant in Japan? These were the uncompetitive players that made devices to order for US/Japanese operators, but could not sell them in the open market. Where were Ericsson and Nokia handsets? Almost everywhere, even in the USA.

Japan, Korea and the USA were fragmented markets, using proprietary technologies under the control of local players (PDC, iDEN, PHS), with high patent licensing costs (CDMA), or only regional relevance (TDMA, GSM-USA). Operators completely controlled the sales of handsets. Nokia was always able to sell simple devices for prepaid US MVNO, but high-end models sold via post-paid had to be customized and crippled to the whims of ATT, Verizon and co, which Nokia refused to do. Neither Motorola, Ericsson and Nokia, nor Korean manufacturers really cracked the Japanese market. Korea itself was shut to outside competitors (as an industrial policy), but its market was much too small to accommodate the many vendors (Samsung, LG, Hyundai, VK Mobile, Pantech, Innostream), so these had to compete worldwide.

Ericsson and Nokia had two problems: a) They were also selling network equipment to operators. b) They did not have any compelling service that operators would be desperate to have. Apple put all value-added services except voice and data transfer into its own environment, providing something that operators could not offer themselves, and therefore had to accept Apple conditions to retain customers. RIM had done it too in its own way: enterprises eagerly wanted a secure messaging service, but operators could not provide it themselves; so RIM wormed its way in very successfully. Had Nokia been able to offer Nokia Maps with navigation in 2004, perhaps US operators would have fought to get Nokia devices in their catalog.

Even then, Nokia's fate would have been similar. Having a couple of superior exclusive services like BBM or Nokia Maps would not suffice to withstand the onslaught of a Google, Apple (or even Microsoft) that offers integrated messaging, maps, email, apps, cloud storage, etc. Required were a software infrastructure (Nokia was building it desultorily with Ovi), completely splitting network and terminal businesses so they could work unimpeded by each other's goals (Nokia and Ericsson separated them half-heartedly), and switching from a telecoms to a computer-oriented device platform (which Nokia did, lackadaisically, with Maemo).

Were Nokia irredeemably bad, it would have joined Siemens, Palm and Benefon in the grave long ago. Given its setup, it could hardly have jumped to a new technological and commercial configuration on its own.

B aron 9 5

@Winter Sorry - Assembly jobs - be it Toyotas or new Mac Pros - are returning to the US in cases where ALL costs are competitive. That means that US labor content (costs) + energy + shipping + taxes + regulatory compliance costs, etc must be competitive.

Given that energy costs in the US - e.g. Natural Gas and transportation fuels - are the lowest in the industrialized world, the US is the largest local market for most goods,etc - US wages just need to be in the zone of 2X-5X those of say China and India to be competitive, depending on labor content of the product.

A Mac Pro requires about 15 minutes of total assembly labor. At $30 an hours (wages + benefits) that is $7.50 per Mac Pro which sells for $4K-$8K each. Inconsequential.

Same for cars. A Mercedes built in Alabama, has 30 hrs of final assembly. At $40/hr, that is $12,000 on a car that sells for $40-$80K.

We are not that far off from being competitive for $600 iPhones. Maybe another decade or so.

There should be ZERO incentive to "give" money to US residents. There should be incentives to MAKE money out of the labor of US residents. Just like Honda, Toyota, VW, BMW, Mercedes, Alcoa, Intel, etc do.

If you look at the all costs in, the US and China difference, while still large, is converging quite fast. All we need is a little bit more of crisis squeeze to make the average American willing to work as hard and with as little whining as the average Chinese. That may take a bit longer - 20 or 30 years.

B aron 9 5

@E.Cassais You are missing the point. Being present in those markets would have helped Nokia understand the dynamics and need to change to computing and Internet services sooner than they did.

Yes Palm died, but not before they scrapped their old ways completely and went to a full Internet, computer in your pocked model - Web/OS. They failed, but failed going in the same direction.

Moto too, didn't prosper, but surveyed and rewarded investors with $12.5B buyout by Google, by going full Android early on. So did LG, Samsung, HTC. Even Microsoft is still getting around $10 per smartphone sold on the patents.

Sharp may have failed in smartphones, but they are walking away with a huge chunk of the capacitive screen market - not a bad way to participate. Same for NEC (memory and other components). Same for Panasonic (camera sensors).

In fact, it was only Ericsson, Siemens, Alcatel that had to exit the market with nothing to show for it. And Nokia was going the same way, until Elop came along and managed to extract $7B in shareholder value, selling to Microsoft + potential for increased patents revenue.

You can have whatever opinions you want. But the *FACT* that just before GSM, Nokia, Ericsson, Siemens, Alcatel, had tiny share of the global handset market. During the GSM (UMTS to some extent) era they had HUGE share - way over 50% combined. And now (soon) they are down to zero share.

You can argue about cause and effect. But the *FACT* is that their share of the global market exploded with GSM and cratered in the post GSM era. Wherever CDMA2000, W-CDMA, TD-CDMA, LTE, TD-LTE technologies became prevalent, you can plot the demise of the European handset makers.

You can spin it, but you can't deny the fact. The GSM era share for the Europeans was a classic bubble.

Did the advent of smartphones accelerated the popping of the bubble? Sure.

But it would have popped either way.

TDC123

Probably this is a bit off topic and more looking towards the new year, but considering that Tomi was such a big backer of SMS I am surprised he hasn't really talked about the current proliferation of OTT Messaging Apps like WhatsApp, Line etc. but still focusing on what has been. The platforms wars are over.

Winter

@Boron95
"labor content (costs) + energy + shipping + taxes + regulatory compliance costs, etc must be competitive.

Given that energy costs in the US - e.g. Natural Gas and transportation fuels - are the lowest in the industrialized world, ..."

You mean trade barriers and subsedies bring back jobs?

B95

@Lee - True, but it raises suspicion and merits analysis or investigation - if we really cared so much about why Nokia/Continental European companies failed in mobile handsets - we don't.

Better to look forward - so much going on.

B95

@Winter "You mean trade barriers and subsedies bring back jobs?"

No, I mean that the vast amounts of energy sources (natural gas, oil) being liberated by hi-tech horizontal drilling and hydraulic fracturing (just to name two) in the US and Canada has made energy (specially natural gas) extremely cheap for industry in the US. At this time, for example, the price per ton of aluminum and steel manufactured in the US is becoming extremely competitive - just to name a few.

Point is that it is total costs that matter, not just labor cost.

Opposite of trade barriers - let it all be open. Let capital flow to where it is more productive. Lets have countries compete for capital by making themselves attractive places to invest.

winter

@Boron95
"Opposite of trade barriers - let it all be open. Let capital flow to where it is more productive. Lets have countries compete for capital by making themselves attractive places to invest."

If the USA was into free trade, the gas would be sold at world prices to whomever would buy it. However, the energy prices in the USA are low because of massive subsidies. For instance, frakking is expensive. Too expensive without subsidies.

The whole assembly lines business locating into the USA are the result of tax and trade barriers agains foreign companies.

B aron 9 5

@Winter - Way off topic, but there is no free trade, no free markets, no free capitalism in the world today.

We have an over regulated economy, over regulated energy markets, over regulated labor markets, over regulated trade rules, everywhere.

Which in the end is largely irrelevant. Capital will flow and leak around the regulations to the locations with the least friction and burden.

Again, you have a problem navigating the world as it is, and just keep whining about the "unfairness" or whatever. Who cares. You need to operate/invest the way the world is, while you try to influence (lobby, voting, etc) the way it will be in the future.

It is amazing how much time you spend whining. US energy is cheap. Period. If you want to smelt aluminum you need a lot of energy - you could care less why it is cheap. You care that it is cheap and will try to insure it continues to be cheap in the future. Who cares why Windows Phone has 100K apps - it is irrelevant for OEMs and consumers if it was because Microsoft paid for the apps or the Pope commanded all catholics to write WP apps. The apps are there. Period.

It is quite amazing how much energy Tomi and you spend on wishing the world was different. Wishing that the most elegant, the most free source, the most whatever OS/phone would win. The world does not work that way. Usually, all things being equal, it takes money, innovation, marketing, etc to win. And yes, it takes enough money to influence politicians, regulations, hire the lawyers, lobbyists. It takes all that to succeed.

The sooner you come to grips with that, the less you will waste you time whining and whiting that things were different.

They aren't.

Winter

@Boron95
There never was a global free market. It was you who claimed US wages were becomming competitive for bringing back high tech jobs. I simply stated they were not high tech and depended on tax and trade barriers. That is, US politicians decide how many jobs will be created at what wages.

Nothing the Chinese or Germans have to worry about.

B aron 9 5

Wish we could move out of this thread - may be time to let this whole site die. We are way into the weeds.

But yes, China, USA, Germany don't have much to worry about for now. All three countries have a couple of minor challenges, but they have their huge strengths - endless labor, monopoly on reserve currency, productive manufacturing partly subsidized by a common currency, respectively.

I'm looking for all three economies to continue to pull away from their peers.

Anyway, smartphone ecosystem wars ended, in the predicted year - 2013 - and in the predicted fashion: Google/Apple/Microsoft.

2014?

Looking forward for another $1.5T USD being minted out of thin air in 2014 chasing investment opportunities.

So happy investing in 2014. Remember those new USD have to go somewhere - don't fight it - but you can dabble in a few crypto coins here and there, maybe do a little "prepping" - but just a little.

AndThisWillBeToo

I became curious and decided to check if B95 and leebase are just BSting the whole forum.
Leebase is clear. He has been commenting here way before MS/Nokia deal, Tomi ignoring him. His initial reaction of Nokia/MS deal can be read here:
http://communities-dominate.blogs.com/brands/2011/02/first-analysis-of-nokia-microsoft-alliance-wow-this-is-good-for-microsoft/comments/page/2/#comments
Apple profits blahblah Nokia losing market share blah. The usual.
Baron95? Said that Nokia will be synonym to WP(8) in 2013. Also said that in 2013 WP will finally bypass BB OS. Please note: he did not say WP would pass Android or iOS. BB. And not before 2013.
http://communities-dominate.blogs.com/brands/2011/02/when-things-get-even-worse-than-you-thought-1st-preview-of-potential-for-nokia-microsoft-partnership/comments/page/2/#comments

B aron 9 5

OK - Here is one thing I anticipate for the future of Microsoft/Nokia - one of the many benefits of the acquisition.

I think that within the next 18 months, Microsoft will launch a Lumia phone and/or Surface tablet with Kinect-like technology where gestures won't need to tough the screen, and may even recognize your face and/or where you are looking and react accordingly.

I think Microsoft will be first to market on this, and it will but a small step in the phone/tablet/PC/game console-TV convergence.

Will it be a huge sales driver? No. But it will get it cool press, show innovation, who knows, maybe increase market share another 1% or so.

(Incidentally, I think this is one area where a Japanese company - Sony - may be the fast follower)

I think there is a 1 in 3 chance that by the same time - 18 months from now - XBoxOne, Kinect, Lumia, Surface by Microsoft will be a "cool" brand/family among the in-crowd.

Lets see how Microsoft executes on the product and, most importantly, on the distribution side.

That is assuming that Operator Skype boycott does not derail them :)

RottenApple

@AndThisWillBeToo:

"Baron95? Said that Nokia will be synonym to WP(8) in 2013. Also said that in 2013 WP will finally bypass BB OS."

Not to be rude, but these predictions weren't hard to make. It was already clear that nobody aside from Nokia had any interest in Windows Phone. To be precise, both were synonymous already at the end of 2011 for that reason. (in other words, this prediction doesn't mean anything positive, either for Nokia or Microsoft. If Nokia is the only company pushing the OS, they'll inevitably become the only company being visible in the market with that OS. And it still resulted in their phone buiness's sale so it can be considered an utter failure for Nokia.)

As for Blackberry, I wrote them off when BB10 was first rumored to be delayed. They would have needed to convert their user base at a time when they still had some power behind their name - but it was already late for that in early 2011.

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