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Mobile Phone

Market Trends

Ausaf AliCandace Daley

Eduardo GuzmanAndrew MartinProfessor Alam

12 May 2011



About The Authors

Ausaf Ali- Ausaf Ali currently resides in Orange County,

California. He is employed at a semi-conductor company and has

worked in the cellular wireless industry for a number of years. Heis a senior at CSULB, with a major in Mechanical and Aerospace

Engineering. His aspirations include continuing to contribute to

the wireless communication engineering field in various technical

and customer support disciplines

Candace Daley- Candace Daley is 20 years old and lives in Torrance,

CA. She is currently a candidate for a Bachelor's of Science in Mechanical

Engineering from CSULB and will graduate in spring 2012. She plans to

continue her education at UCLA for a Master's in Mechanical Engineering

and then attain an MBA from Loyola Marymount. With a technical background, her goal is to climb the corporate ladder and make strides in

the business of engineering. Her hobbies include shopping, beach

volleyball, and baking; much of which she will be indulging in this

upcoming summer of 2011.

Eduardo Guzman- Eduardo Guzman is 23 years old and lives in Long

Beach, CA. He is currently attempting to earn a degree in Mechanical

Engineering from CSULB, and is on track to graduate in fall of 2012. He

is first generation born in the United States and is of Mexican descent. He

currently is working at the CSULB bookstore as a student assistant. Hishobbies include soccer, football, and video gaming. He hopes to get an

internship during either the summer or fall of 2011. Once graduated from

college, he hopes to attain a job that deals with manufacturing.

Andrew Martin- Andrew Martin is 20 years old and lives in Montebello,

CA. He is currently in the process of earning a degree in engineering

from California State University, Long Beach. His long term goalsinclude going to medical school to become a dermatologist and opening

his own practice. He currently works as a Math and Science tutor at East

Los Angeles College and a Senior Lifeguard for the City of Monterey

Park. His hobbies include rock climbing and weightlifting.



Since the early 2000s, cell phones have acquired an increasingly important function insociety. Although cell phones were first introduced for consumer use during the 1980s, it wasnot until recently that their popularity in consumer markets began to increase exponentially.Today, cell phones help people complete an array of tasks from making phone calls andcompleting text messages to surfing the internet or finding directions. The rise of the cell phone

industry though can be attributed to their strategic marketing and the rapid technologicalinnovations of mobile devices. The industry has created a need for cell phones by convertingdifficult tasks into simple ones. In order to better understand the industry, it is necessary to break it down and understand it on several different levels. These levels include the marketingtrend, market segments, engineering and life cycle of cell phones.

Marketing Trend

There are several parts of mobile market segments and statistics. The parts include allmajor aspects of mobile trends and facts. Due to the increasing complexity and growing facets of this industry, these have been divided up in order to facilitate delivery.

Top five operators by different KPIs (key production index) worldwide are shown belowin the table. The most interesting thing is the predominance of Asian mobile operators in both thecustomer loyalty and data revenues sections. This can be accounted for by the sheer percentageof mobile users that reside in these countries compared to the rest of the world due to the factthat they have the majority of the population. Customer loyalty is a slightly more important facetin Asian cultures for the consumer than western ones. (Note: the analysis in this report is basedon 2008 revenues).

Rank Subscribers

Total

revenues

Monthly

ARPU

Monthly

churn

Proportion of revenues

derived from data

1ChinaMobile

ChinaMobile

3 UK NTTDOCOMOJapan

Smart Philippines

2ChinaUnicom

AT&T USBourgesFrance

KDDIJapan

Globe Philippines

3

Bharti Airtel

India

Verizon

US

Vodafone

Ireland

SingTel

Singapore SoftBank Japan

4 AT&T US NTTDOCOMOJapan

O2 IrelandChunghwaTaiwan

NTT DOCOMO Japan



5 Verizon US Sprint USOrangeSwitzerland

T-MobileGermany

KDDI Japan

Source: Portio Research (June 2009)

The first part (A) of this analysis includes mobile subscribers, handset data, and mobileoperators. There are 5.3 billion mobile subscribers (77 percent of the world population). Chinaand India compose most of these, which is understandable since they compose most of theworld¶s population. ³Mobile growth is being driven by demand in the developing world´, saysThe ITU (October 2010); by India and China in particular. These two countries collectivelyadded 300 million new mobile subscriptions in 2010 ± that is more than the total mobile

subscribers in the US. Mobile device sales rose in 2010, with Smartphone sales showing thestrongest growth. Nokia remains number one in both smart phones and mobile phones, withregional variations. The most common brand of phone in West Europe is Nokia; in the US isSamsung; and in Japan is Sharp. Smartphone penetration is higher in developed nations than inthe rest of the world, but even in the US the vast majority of devices are still only feature phones.Smartphone sales showed a strong growth worldwide in 2010. According to IDC (February2011), total shipments in 2010 were 302.6 million units up 74.4 percent from 2009. This makessmart phones 21.8 percent of all handsets shipped. Also according to Strategy Analytics(February 2011), total shipments in 2010 were 292.9 million units up 67.6 percent from 2009.This makes smart phones 21.5 percent of all handsets shipped.

The second part (B) covers the mobile web usage and users including different kinds of

coverage. Half a billion people accessed mobile Internet worldwide in 2009. Usage is expectedto double within five years as mobile overtakes the PC as the most popular way to get on theWeb. But with 277 million mobile Web users just in China, this estimate is sounding a bitconservative. The reason experts believe it is inevitable that mobile access to the Web willovertake PC access at some point (assuming the present expansion of 3G networks andavailability of Internet-ready phones continues) is that mobile phone penetration outnumbersfixed Internet users 5:2. In the developed world, only 21 percent of people have Internet access,with the lowest being in Africa at 9.6 percent. The price of fixed broadband in developing mobileWeb countries remains prohibitively expensive. Many mobile Web users are mobile-only, i.e.they do not, or very rarely use a desktop, laptop or tablet to access the Web. Mobile-only inEgypt is 70 percent, India is 59 percent and the US is 25 percent. Almost one in five global

mobile subscribers have access to fast mobile Internet (3G or better) services and the numbers of 3G handsets are growing fast. The ITU (October 2010) estimates that at the end of 2010 therewill be 940 million 3G subscriptions (that¶s 18 percent of total subscriptions). 3G networks arenow available in 143 countries and some countries such as Sweden, Norway, Ukraine and UnitedStates are already moving to 4G. Widespread availability of unlimited data plans is critical to penetration of mobile media usage. It drove mobile media in Japan and is now driving it in theUS; but in W. Europe, lack of availability is slowing down progression.



The next part (C) is about mobile marketing, advertising and messaging. SMS still leadsmobile messaging with more than 6.1 trillion messages sent in 2010. Despite the popularity of mobile email, IM and MMS, SMS is predicted to exceed 10 trillion in 2013. The most number of texts are sent in the Philippines and the United States although MMS, mobile email and instantmessaging are all growing strongly. The driver for MMS is the number of camera phones, for

mobile email is the business market and IM is popular with the youth market. Estimates for expenditure on mobile advertising and marketing worldwide ranged from US$1.4 billion to $7.5 billion in 2009 and further growth is expected. Analysts expect to raise mobile ad expenditureforecasts as $1.14 billion in Japan (2009) alone; Google now makes $1 billion in annual mobilead revenues, and US mobile ad revenues are expected to hit $1 billion in 2011. Where fixedInternet access is limited, mobile is the dominant means of accessing the Internet. In India,mobile accounted for nearly 90 percent of all Internet users in 2008. Visitor numbers to popular mobile Internet sites makes strong case for advertising and sponsorship options. Brands can buildup much more detailed profiles of user responses compared to online and plan follow-upcampaigns accordingly. Japan is still number one when it comes to mobile advertising, based onits highly developed mobile Web. Google¶s gross revenue from mobile advertising is over $1

billion per year. When analyzing what types of mobile marketing do people respond to the most, in the UK and France SMS gets the best results, in Germany mobile Web ads get the best results.According to consumer research by the MMA and Lightspeed Research (October 2010), in UK,France and Germany, 45 percent of consumers (especially younger people) noticed mobileadvertising and of these, 29 percent responded to it. Of those that responded to the ads, inGermany 49 percent, UK 47 percent and in France 22 percent went on to make a purchase. Themost effective form of ads was opt-in SMS in the UK (40 percent said they were more likely torespond to these) and in France (21 percent); while in Germany it was mobile Web ads (27 percent). Time sensitive special offers or discounts (especially m-coupons) were most likely tolead to purchase. People were most likely to purchase mobile content such as applications, musicand games.

As for the next part (D), it concerns consumer mobile behavior. A recent comparison survey between Japan, US and Europe, show that the Japanese are still much more advanced in mobile behavior; with 55.4 percent and 53.3 percent using apps, compared to 36.4 percent and 34.4 percent in the US and 28.8 percent and 28.0 percent in Europe. Despite all the media hype, andvast sums pumped into developing and promoting native apps, more consumers use their browser than apps in developed nations. Only a minority will use Web or apps exclusively. Even indeveloped nations (where Smartphone penetration is higher), more people use mobile Web thanmobile apps. Very few use either mobile apps or mobile Web exclusively. Only 6 percent of appusers in the US and 7 percent in Europe don¶t use their browser. While 8 percent of browser users in the US and Europe don¶t use apps. Most popular activities on the mobile Web aremobile search, reading news and sports information, downloading music and videos, and email

and instant messages. IDC (December 2009) believes the most popular activities today are:mobile search, reading news and sports information, downloading music and videos, andsending/receiving email and instant messages. Over the next four years, IDC predicts the fastestgrowing activities will be purchasing, social networking and blogging. Accessing online businessapplications and corporate email systems will also grow rapidly. CINIC reports (July 2010) thatamong China¶s mobile Web users ± the world¶s biggest mobile Web community ± the most popular activities are: instant messaging (62 percent); search (48 percent); web music (45 percent); web literature (43 percent); social networking 36 percent; games (21 percent); video



(20 percent); email (16 percent); and m-commerce (6 percent). M-commerce is mobile bankingand transactions.

The next part is E that covers mobile apps, app stores, pricing and failure rates. Over 300,000mobile apps have been developed in three years, however demand for download mobile apps isexpected to peak in 2013. ABI Research (May 2010) predicts that app stores will slowly declineas subscribers migrate from download apps to mobile Web sites and more popular downloadapps, such as social networking, are preloaded on mobile devices. The most used mobile apps inthe US are games; news; maps; social networking and music. The average price of a mobile appis falling rapidly on all vendor app stores, except Android. The Distimo report (January 2011)finds that in December the average the cost of downloading an app was considerably cheaper than it was in January 2010. Distimo makes analytics tools for mobile apps. One in four mobileapps once downloaded is never used again. Some app stores, including the largest, Apple, keepdownload stats for individual apps a secret, which saves the publishers from embarrassment.Thus you will only hear download figures for the more successful apps, but while these soundimpressive, they don¶t mean much without the retention rate i.e. how many people are still usingthe app a week, month, or year later.

The Mobile and Wireless industry is not only growing, but doing so very rapidly. It isestimated that the global mobile market will pass the trillion dollar mark by 2013 and the number of mobile subscribers will be well over 5 billion. In addition to mobile phones, wireless featuresare embedded into consumer electronics and industrial solutions giving the market some extragrowth energy. The long term wireless growth includes ubiquitous computing, where we aresurrounded by countless tiny embedded processors that are connected (often wirelessly) to thenetwork. This combination of cheap computing power and seamless communication (thewireless digital revolution) enables a flood of new innovative products and services.

Next will be the analyzing the market share trends. According to ComScore¶s data, Google¶s

Android rose from 23.5%

market share in October 2010 to 31.2%

in January 2011, enough tosecurely grab first place from RIM¶s BlackBerry, which fell 35.8% in October 2010 to 30.4% inJanuary 2011. A recent report from Nielsen also claimed that Android is now the number oneSmartphone platform in the U.S. Apple¶s OS experienced a minute growth in the same period:from 24.6% to 24.7%, while Microsoft and Palm continued losing market share, ending at 8.0% and 3.2%, respectively. Device manufacturer Samsung ranked as the top OEM with 24.9 percentof U.S. mobile subscribers, up 0.7 percentage points from the three month period ending inOctober. LG ranked second with 20.8 percent share, followed by Motorola (16.5 percent), RIM(8.6 percent) and Apple (7.0 percent). Google Android captured the #1 ranking amongSmartphone platforms for the first time in January with 31.2 percent market share. RIM rankedsecond with 30.4 percent market share, followed by Apple with 24.7 percent. Microsoft (8.0

percent) and Palm (3.2 percent) rounded out the top five. In January, 68.1 percent of U.S. mobilesubscribers used text messaging on their mobile device, while browsers were used by 37.0 percent of subscribers (up 0.8 percentage points). Subscribers who used downloaded applicationscomprised 35.3 percent of the mobile audience, representing an increase of 1.6 percentage points. Accessing of social networking sites or blogs increased 1.1 percentage points,representing 25.3 percent of mobile subscribers. Playing games represented 23.7 percent of themobile audience, while listening to music represented 16.5 percent (up 1.1 percentage points).



ComScore, a leader in measuring the digital world, released data that supports someinteresting trends in smart phone usage. 42.7 million people in the U.S. owned Smartphone, up18 percent from the August through October period. Here is content usage breakdown: most popular activity is still text messaging (63.5%), web surfing (28%), games (28.6%), accessingSocial network sites (17%), listening to music on mobile phone (12.8%). Accessing social

network has a boost of 3.5%

in last month; text messaging has 1.5%

while paying games havenot changed much. Blackberry is still most popular device used by 43% of the smart phoneowners. Apple has a share of 25%. Microsoft gave up 4% to Google which has 7.1% (4.3% upfor 3 months). Palm is in trouble and down 2.1% to 5.7% total maker share.

Market Segmentation

In order for a company to succeed in its business, it must make sure that it has a strategic plan to approach the people it targets. Not only must it know which people to target, but the wayto target them. This is accomplished through market segmentation. The aforementionedstatistics of the companies in the cell phone industry needed this information in order to becomeas popular and successful as they are today. Market segmentation is a concept in business and

economics that divides an audience into several groups. A market segment is a subset of amarket consisting of people or groups that share similar demands for a product and/or service based on the qualities of that product. In order for it to be a true market segment, the segmentsmust be distinct from each other by having specific needs for their group. Creating marketsegments is important so that custom marketing strategies may be tailored for each group.

Now, in order for market segmentation to be carried out, a company must conduct marketresearch and development to determine the needs of the industry and how the markets are to besegmented. It must be known how many segments there are and the characteristics of each. Anempirical survey conducted in Italy on the cell phone market by Professor Clelia Mazzoni, andPh.D. students Felice Addeo and Laura Castaldi has helped to provide information on how tosegment the market. The research centered on a random sampling survey of 784 people that was

given a 3.5% margin of error. The subjects surveyed ranged from 14 to 65 years in age, sincethis age distribution would be the group most sensitive to mobile use.

Factors of Cell phone Use

After the designing of several survey questions, it was necessary to bundle them anddetermine how they related to the different factors of cell phone use. The study decided there arethree factors of cell phone use: Lifestyles, Use Motivations, and Product Attributes. Within eachfactor were more specific subset headings into which the survey questions belonged. Lifestylesconsisted of the overall social values of an individual, which would be strongly correlated totheir consumer behavior. Some lifestyles are fast or slow, rich or poor and social or family

oriented. Use Motivations related to the use of cell phones socially or as distance regulators.Sometimes they are even used to cure boredom. Lastly, Product Attributes took into regards thefeatures and functionality of a cell phone.

Lifestyle

Conformist Committed Progressive

Media Exposure of a 0.760 0.0220 0.051



Simple Nature

Basic Values 0.519 -0.561 0.007

Media Exposure withExternal Contact

-0.012 0.661 0.047

Media Exposure with

Information Purposes

0.097 0.645 0.306

Well-Being 0.492 0.482 -0.297

Media Exposure of Individual andReflective Nature

-0.232 0.087 0.664

Social Participationand EnvironmentalProtection

0.261 0.148 0.797

As mentioned before, once the survey questions regarding each factor of cell phone usewere assigned to their appropriate group, it was necessary to further specify them into even more

distinct groups. The first factor, Lifestyle, is a set of socio-demographic indicators, values andsocio-psychological characteristics of individuals¶ behavioral variables and consumption of products and services. That being said, the study divided Lifestyles into three different types:Conformist, Committed, and Progressive. Conformist groups are identified as having basicvalues such as family and physical safety. They also are exposed to simple media such astelevision and sports news. Committed groups are identified as individuals who share familyvalues and strive to be successful. There media exposures are usually outside their householdand work place, consisting of theater venues and the use of the internet for informational purposes. Progressive groups are usually very social people and are exposed to individual mediasuch as listening to the radio and reading books.

Use Motivations

Sense of Belonging Distance Control Relational

Because I like beingtrendy

0.845 0.063 0.023

Because it makes mefeel part of a group

0.723 0.333 -0.162

To communicate withmy family

-0.526 0.591 -0.255

Because it makes mefeel safe

0.131 0.472 -0.466

To send text messages -0.078 -0.096 0.734To communicate withmy friends

-0.330 0.111 0.728

To enjoy myself 0.156 -0.025 0.448

For the accessoryfunctions

-0.283 -0.654 0.073

Because I¶minterested in advance

0.010 -0.745 -0.112



series

For work -0.495 0.054 -0.577

To save on calls tomobiles

0.078 -0.069 -0.073

Use Motivations is defined as needs that induce purchase and that explain an individual¶sconsumption. They essentially form the social identity of a person in how they respond tooutside stimulants. The functional benefits of a cell phone create a motivation of use that joinwith the psychosocial benefits. The three different types of Use Motivations are: Sense of belonging, Distance Control and Relational. The group who yearns for a Sense of Belonging ischaracterized by materialistic views and like to be trendy and in with the latest and coolest products. This group is easily influenced by external stimulants and is very easy to market to.They tend to be the target customers for the cell phone industry since they provide much profit.Those individuals in the Distance Control group are very family oriented. They like to keep inclose contact with their spouse and children. Cell phones provide a way to facilitate

communication. Families are a big target for cellular companies. There are plans tailored for them that include texting so that the family may keep in contact even when they may be too busyto talk. The Relational group is very socially active. They highly value communication withtheir peers and use it as a way to enjoy themselves. Cell phones help them to maintain the socialnetwork they have with their friends and to stay in the loop.

Product Attributes

Price/Diffusion Ease of Use Functionality

Price 0.529 -0.051 0.032

Diffusion amongst

acquaintances

0.487 -0.135 -0.023

Screen Visibility -0.104 0.716 0.231

Simplicity of Use 0.401 0.631 -0.051

Handiness 0.115 0.602 -0.222

Battery Length 0.057 0.201 0.628

Durability 0.194 0.049 0.598

Quantity of Accessories Available

-0.240 -0.207 0.468

Presence of Other Functions

-0.586 -0.104 -0.087

Notoriety of the

Mobile Phone Brand

0.281 -0.523 -0.150

Availability of TechnologicallyAdvanced Services

-0.571 -0.246 -0.056

Aesthetics -0.263 -0.268 -0.296

Possibility of Personalizing theMobile Phone

-0.300 -0.357 -0.403



Possibility of Playwith Video Games

0.027 0.046 -0.642

Products Attributes are features of the product or service and mainly determine the

selection among the various offers within the product class. The three different categories of Product Attributes are: Price/Diffusion, Ease of Use and Functionality. Price/Diffusion relates tothe price of the mobile phone and how many peers own that product or service. This type of person only likes to buy a particular phone if the people around them are using the same phone.The group that enjoys phones that are easy to use is very practical. They like the phone to beeasy to navigate through and overlook any high end functions that only the technologically savvyuser can utilize. In addition, they prefer a visible screen and the handiness of the phone in their everyday life. The group that appreciates functionality is looking for more ³bang for their buck´.They not only want the basics of a phone to be great, but also want an array of applications thatcan be used on it. Functional groups demand the whole package. This group enjoys phones thathave long battery life and that are very durable. The number of accessories the phone has is a

big deal as well as the aesthetic attractors such as the color and design of the phone.

Distinct Markets

After using statistical analysis, the Italian researchers conducting the survey on the cell phone industry realized that it was rather easy to determine the distinct markets of consumers.After analyzing the data, the researchers decided to use lifestyle as a discriminating dimensionand attributes and motivations as descriptive ones in order to avoid overlapping marketsegments. It turned out that Conformist groups consisted of 42.9% of the market. They are themost susceptible to marketing of new phones. They tend to buy new phones even if their current phone is not out of date or is not yet worn out. Phones tend not to be a communication tool per

se¶ for this group, but as more of a status symbol. They need the phone to feel a sense of belonging and fit in with their peers who probably all have it. Committed groups took a low16.3% control of the cell phone market according to the survey. This group was rather anachronistic, meaning they use cell phones as a straightforward extension of their home phone,not bothering with all the functions or the added services. That is probably why the data foundthat the users in this group appreciated the ease of use of the phone. They do not care to surf theweb or play games on their phone. They seek the practicality of using a mobile device tocomplete their everyday tasks with a bit more ease. In addition, the cell phone is largely used asa distance control device by this group. They seem to enjoy how it can be handy when needed tocontact someone immediately. The Progressive group took the remaining share of the mobile phone market at 40.8%. This group values social networking and using cell phones to keep upwith their friends. They also enjoy using the many applications phones have to offer as well ashigh functionality in terms of battery life and durability.

Cluster Analysis

Now that the markets have been established, it begs the question, which tangible peoplefit into these groups? How do they look? What age group are they in? What gender are they?For Conformists, these people have a broad age distribution, equal numbers in men and women



and usually have a low education level. Their occupation is usually a non-professional one.They also are ostentatious by nature. The typical conformist would be a teenager who constantlyis updating their phone to fit in with the trends.

The Committed group consists mainly of middle-aged married men who attribute particular importance, among the ³value´ aspects, to well-being (economic security and personal

success). The Committed are usually highly educated, in some cases with postgraduatequalifications, and are mainly self-employed (presumably freelance professionals) and, in second place, employees. They purchase a mobile phone to communicate with their families, and for asense of security arising from the chance to stay in touch with others.

The Progressive group usually consists of mainly young unmarried students, especiallywomen, who state they attribute maximum importance to values of social participation andenvironmental protection. Mobile phones do not appear to represent for the Progressive a meansof belonging to a group nor an element of distinction or status symbol, but simply a useful toolfor socialization, communication and entertainment.

The importance of the research conducted on mobile phone market segments has led tothe success of permanent fusion of cellular devices into the daily lives¶ of humans. Were it not

for research of the cell phone industry such as this, it would have been harder for mobile phonecompanies to figure out who their audience was and how to market to them. The main thing thissurvey has taught us is that cellular companies must offer variety. Every user buys and uses a phone for a different reason. Some buy it for looks and trendiness while others buy it for functionality or practicality. Some users buy a phone to utilize its social media componentswhile others merely use it to make basic calls. What is the industry to infer from these facts?They must infer that they have to have a vast variety of phones and variety of cell phone plans. If a company has various plans, they can tailor to the needs of the consumer and increasesubscriptions and profits. Various phones are needed because some users may want something plain and simple while others want a more sophisticated device. Different people use phones for different daily functions and it is important that an industry supplies enough of a variety of phones to meet those uses.

The cell phone industry has capitalized on research such as this to create a wide variety of cell phones and caller plans. Among the various cell phone plans are a few more notable ones:2-year contracts, Pay-as-you-go and Monthly Plans. 2-year contracts appeal most to theConformist group because these contracts usually are packaged with a trendy phone at a low price, which is known to be a deciding factor in phone purchases for Conformists. Sincecontracts are packaged with many functional phones that offer many applications, theProgressive group is a fan of this plan. They also appeal to the Committed group because phonecompanies usually have family plans associated with their contracts that offer unlimited callingand texting for members within the plan for a reasonable price. This is good for the Committed because they can keep in contact with their family through various methods while keeping costsdown. Pay-as-you-go plans are usually meant for children and/or pre-teens that limit phone useto communicating with parents. Sometimes parents may not want to incorporate an extra phoneinto their plan because they feel its use will not be exploited still want to be able to keep in touchwith their children. Pay-as-you-go phones are perfect for this situation. This plan is for theCommitted group. Monthly plans are used mainly by the Progressive group. Sine this groupwas characterized by young unmarried individuals, sometimes money is not plentiful and theymust forgo the cost of a binding contract in the event that they cannot pay the bill. Monthly plans allow them to escape any penalties in case they cannot pay for that month.



The plethora of phones on the market today is enough to satisfy every type of consumer.There are smart phones, GO phones and basic phones. Smart phones are very popular and filledwith useful applications. They attract Conformist and Progressive groups who wish to keep upwith the trends and utilize the social media applications they have. GO Phones are not flashyand are for the Committed group who want their kids to have a phone for communication

purposes. Basic phones usually do not have the same capabilities as smart phones. They do nothave downloadable applications but usually have limited Internet functions and GPS.Progressive groups and Commited groups both like these types of phones because they offer practicality and functionality.

Engineering

The invention of mobile phones has allowed people all over the planet to connect witheach other and talk in ways never before imaginable. The way cellular devices communicate isessentially the transmission, coding and decoding of radio signals. However, the internaltechnologies of cellular phones are much more complex, allowing the use of countless other features and abilities that phones now contain.

The internal engineering of cell phones takes many different forms; everything from theuse of different forms of batteries, the use of data and data transfer via cords and cards, and thecell phone operating systems themselves. Much of a cell phone these days does not deal with theactual radio transmissions, but everything else. Modern mobile phones are capable of more thanever before.

Data Transfer

Cell phones are capable of storing large amounts of data in various forms, from contact

lists and task lists to photos and video. Different phones are capable of different amounts of data,

and some phones designed for multimedia can hold much more, such as Apple Inc.'s iPhone,which is currently capable of holding up to 32 gigabytes of data. Certain data like contacts and

other personal information can also be stored and transferred via SIM cards, enabling users to

transfer all necessary data from one phone to another just by switching the cards between

phones.





In this picture we can see that the battery used for the popular iPhone is a lithium-ion

battery. In order to power all of the different functions, the battery shown takes up literally half

of the iPhone internal space. Most of the Smartphone being used today require that a major

portion of the phone be used for a battery, since the phones use up a lot of power. Today¶s smart

phones are not only used for making calls or sending text messages. Applications are the main

functionality for smart phones and use up a lot of power, so having a large battery to support

constant usage is not only ideal, but necessary.

Manufacturing Procedures

All cell phone manufacturers start the process in the conceptual phase. Several sketches

and wireframes are created using different designs, features and interface options, such as

keypad only and touch screen. These sketches also determine the phone's weight, scale, size and

portability. Because the goal of most phones is to be compact and portable, this phase is the most

intensive. During this process, a team decides what designs will become prototypes. Once a list

is determined, several prototypes are created. These models are usually non-functional and areonly for visual purposes. Prototypes are constructed from plastic, Styrofoam and other re-usable

materials. Once a final design is created, the concept is pushed to engineers, who decide what

electronics are necessary.

The key part of every cell phone is its electronics. The electronics control everything

from the way the phone displays information, places calls and sends location information.

Depending on the features determined during the conceptual phase, different electronics can be



used. For most cell phones, there are three key components: a printed circuit that controls the

keypad and signal reception, a battery and screen.

In addition to the hardware, software is also required for the phone to operate. Almost all

cell phone manufacturers use proprietary software for their phones. The software is designed by

a series of programmers that develop the design of the interface, the phone's basic/advanced

operations and other features. By default, most modern cell phones are programmed with basic

features like text messaging, calendar and clock. After these components and software are

determined, the phone moves on to final construction.

Each piece of the cell phone is created separately. First, the casing for the phone is made.

Most cell phones use a simple plastic that is created using a process known as injection molding.

Once the casing is created, the printed circuit board is made and loaded with the necessary

software/operating system. The circuit board is then placed in the casing, using a series of

eyeglass screws. Next, the other components of the phone are added: screen, keypad, antenna,

microphone and speaker. After the phone is constructed, it is moved on to testing. During the

testing phase, the battery for the phone is added and a worker checks the phone for power, buttonfunctionality and reception. Finally, the necessary documentation for the phone is produced and

sent to be packaged with the phone. Once all of these components are verified, the phone is

packaged and shipped to retail outlets.

This photo is the inside of a Nokia factory. Nokia is one of the world¶s largest and most

sophisticated manufacturers. Though highly automated, the production process still involves

significant human intervention, from placing high-value components like digital camera modules

by hand, to visually inspecting and testing finished products, to packing phones in boxes. Nokia

has reoriented its production into two distinct parts. In the first, more time-consuming stage,



Nokia builds the innards of phones, or what it calls the "engines." These generic engines can then

be customized to take on different jobs.

In the second, fast-turnaround stage, called "assembly to order," Nokia pumps orders

from specific carriers into its production system and transforms the raw "engines" into tens or

even hundreds of thousands of built-to-order phones in a matter of days. Each can have a unique

faceplate, for instance, with the operator's logo on it, or special keypad buttons that take users

directly to certain wireless services. The software inside also varies from one operator to another,

with different menus, features, branding, and languages.

The need to control this complex process with the highest precision and quality is the

reason Nokia has never chosen to outsource its manufacturing. (It does use contractors for a

small number of handsets, mainly older models that don't require customization or rapid

delivery.) Indeed, quite the opposite: Nokia sees its manufacturing expertise as a key strategic

advantage, and with its unmatched volumes, Nokia can make phones more efficiently than any

other company in the world.

This picture shows the cost breakdown of the iPhone 4GB and 8GB. The two have the

same components and only differ in the amount of memory that the phone can hold. The memorycosts $35.00 which is the only difference between the two. The most expensive component is the

memory. The next expensive component is the touch screen which is at $33.50. As the chart

shows, the iPhone is a host of many different components. Most of the price is related to the

chips and processors. The mechanical components and final manufacturing are a small part of

the price. The non-hardware costs are also relatively small. The total cost of the actual phone was

$245.83. The phone was sold at full retail price for around $600 without a contract.



Life Cycle

Mobile handsets with voice and data capability are part and parcel of our daily lives.

These devices and the telecommunication industry in general, have gone through quite a major

technical evolution, from when these handsets first became commercially available some 25

years back.

This has been possible due to the technological improvements in different areas of

telecommunication engineering, including chip design, hardware platforms, RF [Radio Frequency]

technology and software development.

Also, based on the telecommunication engineering evolution, cellular wireless technology standards

were adopted by technical bodies, and were eventually accepted as minimum standards to develop

and produce cellular mobile handsets.

Once the voice technology was mastered and matured in the mid-90s, data technology was alsoidentified as a minimum standard for these devices.

However, this took a few years to become a mainstream feature, given quite a few front-end

applications were identified but none were widely adopted as a clear winner. Examples like WAP

interface apps, Java apps etc. were some of the solutions that were tried.

Industry Overview

The telecommunication industry comprises of 3 major sub-industries. They are

y Silicon Vendors [embedded chip designers/manufacturers]

y Handset Manufacturers [phone manufacturers]

y Network Service Providers [network installation/wireless service]

Silicon Vendors ±

The silicon vendors provide a reference solution to the leading handset manufactures, to be able to

build and mass produce the cell phones.

This reference solution is considered to be a platform, with the complete functionality build into the

platform. Different customers can decide to pick and choose various features that are part of the

platform, based on various factors like market segment, cost etc.

A typical handset platform solution consists of:

y ASIC design, silicon tape-out and sampling



y HW/RF reference platform

y Communication and Application software

y System level verification

Below is a list of some of the market leaders in the cellular silicon vendor industry:

y Qualcomm

y Infineon

y Ericsson Mobile Platform

y Marvell Technologies

Most of these are successful companies that are publically traded and contribute to the telecom

sector in terms of growth and technical engineering advancements.

Handset M anuf acturers ±

These are companies that actually manufacture and mass produce cell phones for the common

consumer. They make the actual end product that is used and ranked by the general populous.

Besides the engineering aspect of the device, a great deal of product research and design efforts

takes place to make the device look attractive to be able to sell.

Lots of factors play in the actual device ID [industrial design] definition, including the market

demographics, customer demands and usage patterns, cost basis etc.

Today¶s handsets take voice capability for granted and additional features like multimedia and

connectivity are quickly becoming standard features. And with the advent of the Android ³open

source´ Linux software kernel, newer and better user applications are becoming the norm.

The market has well defined segments, the high end, middle tier and the low end.

All of the leading manufacturers play in each of these segments, in different parts of the world.

As a general trend, US market is generally strong in the high end phones that are typically subsidized

for the consumer by the network providers. And the likes of Samsung and LG are very strong in this

market. Similarly, Nokia is traditionally the market leader in European and Asian markets.

As the landscape changes, Apple and Samsung are quickly taking away market share from the

world-wide leader, Nokia.



N etwork Providers ±

These are companies that provide the network infrastructure for the cellular wireless industry, and

allow for the mobile handsets to communicate with each other over voice and data networks. The

network providers have evolved in their technology over the years. In the early 1990s GSM was the

voice standard, with some limited data capability using the GPRs technology. Across the globe,

different network providers bid for the network frequencies that are auctioned by the

telecommunication authorities per the respective regions. These free-air wireless communication

licenses are sold for millions. Over the years, as the technology improved, voice networks went from

the 2G (GSM) network to 3G (WCDMA) networks, which is now the de facto standard. It is work

mentioning, a parallel voice standard called CDMA technology was introduced in late-1990s, that

was not widely adopted. It turned out that CDMA was only popular in the US, with Verizon network

adopting the standard. Qualcomm was a major provider of the CDMA chipsets, who capitalized on

the royalty of the technology patents for the CDMA standard.

Today, on UMTS networks, voice is on the 3G WCDMA standard, and data is also using the 3G

technology using HSDPA/HSUPA [High Speed Downlink Packet Access/High Speed Uplink Packet

Access].

The data standard is quickly moving to the 4G wireless standards of WiMax and LTE technologies.

Sprint has already deployed WiMax in its networks with data rates of up to 1+Mbps UL/DL

[Uplink/Downlink] on average. LTE average speeds are supposed to touch around 15Mbps when the

technology is matured.

LTE deployment has recently taken place on the Verizon network, and it is expected over the next

12 to 18 months it will take over any existing data technologies, as the consumer will expect and

demand the LTE standard data rates. This will allow for much improved online streaming content

experiences including enhanced audio and video capabilities.

Below is a list of current market leaders worldwide:

y China Mobile

y Vodafone

y Orange

y Verizon

y AT&T



y T-Mobile Deutschland

Today¶s handsets¶ feature set

Voice communication is ³bread and butter´ for wireless networks and in today¶s day and age it is

taken for granted. Voice uses 2G GSM and 3G WCDMA technologies in more than 75% of

networks worldwide.

Data communication is where the improvements are still taking place, both technically, as well as

from a consumer perspective. Networks are deploying capabilities to provide faster data

transmission, as well as allowing consumers to taste the richness of a mobile device by accessing

content at a moment¶s notice, available at their finger tips.

Recent improvements in touch screen LCDs [Liquid Crystal Displays] in mobile devices, coupled

with multimedia encode and decode improvements have drastically raised consumer expectations.

With improved silicon capability of the chipsets, better processing capability of audio and video³local or streaming´ content has also helped.

Another area of improvement has been the wireless connectivity capability of these devices. With

improvements in standards for wireless connectivity, WLAN as a feature has also become very

popular generally in all commercial gadgets including mobile devices.

Concept Acceptance

When a phone manufacturer decides to launch into a reference phone platform eventually

culminating into multiple products based on this platform, the research of the marketing team is

paramount, as this team defines the market segment, and acceptance of such a product in the marketfew months down the road. Generally, the marketing team is in charge of owning the roadmap,

based upon which the products are defined. As a rule of thumb, the actual product definition is

closely aligned with customer needs and industry standards.

Once a certain product is identified, requirements are set in place providing the platform definition.

This allows for the program to be approved, and launched



Platform Management Team Definition

A program team is defined to lead the phone platform program. This program team has multiple sub-

teams represented from various disciplines:

y

Marketingy Sales

y Engineering

y Program Management

y Customer Facing

This team is usually responsible for

y Defining program timeline

y Tracking design, development, verification activities

y

Identifying risks, resolving issues at all stages of program

Engineering Design of the Platform

Engineering design teams are identified by the program and management teams when the program is

initiated. These teams are responsible for various engineering tasks:

y System Requirements Review

y Design definition

y Design Implementation

y

Validation and Verification

As part of the process, various engineering teams take task to implement their portions of the

technology, eventually culminating in a phone platform that can be mass-produced.

Below is a high-level breakdown of the different teams that are involved:

** ASIC Design and Silicon T ape Out

The design of a chipset is essentially an embedded micro-processor. This can be considered the heartof the mobile handset. It is able to run the Communication, Multimedia and Application technology

processes. The silicon industry is quickly moving from 40nm CMOS [Complementary metal±oxide±

semiconductor] technology to 28nm. The actual ASIC design output is CMOS silicon that has the

core processor. The market leader for ASIC modems is ARM [Advanced RISC Machines].

** Hardware Form F actor Board Design and Develo pment



The hardware team is responsible for the design and development of the board, per the platform

definition, schematic design and board layout requirements. Once the board has completed design, it

is produced in limited quantities for further validation, software implementation and validation and

verification activities. Some key performance metrics of the board are:

1. Platform Current Consumption [idle time, talk time]2. Flash memory consumption [M3 NAND, DDR]3. Platform board size [Area, Length, Width, Height]

** R F Design and Develo pment

As part of the RF development, initial selection of the PA [Power Amplifier] and FEM [Front End

Module] components takes place. Once these components are optimized on development boards,

they are populated on the actual platform hardware boards are further optimized for platform

maturity of the RF. To identify RF maturity, the RF driver software is developed and verified per RF

design and test specifications for 2G and 3G technologies. Some key RF performance metrics are:

1. Rx Sensitivity2. Tx output power

**Software Design and Develo pment

Communication protocol software is developed to allow voice, data, and SMS functionality on the

mobile handset. This involves low level software that is running very close to the hardware will well

defined interfaces. Through the API [Application Protocol Interface] software, there is wrapper

software that connects with the higher level software allowing for the application to run on top.

Connectivity software covers WLAN, BT/FM, GPS, USB and SD features. Application levelsoftware manages Multimedia; applications based on Android and iPhone OS for example, including

popular social networking apps. Android is very quickly becoming the adopted standard for mobile

phone software because of its open source nature. Millions of applications are being generated

constantly, and this is creating a new standard in mobile handsets, not limited only to the high-end

phones any more.



** Pl atform Hardware and Software V alid ation and Verification

While the platform hardware and software is being developed and matured, various levels of

validation and verification is planned and executed. Device level verifies the ASIC blocks, system

level verification covers overall system testing. Lab and field verification is executed when platform

hardware is matured. Certification of the platform for both communication and application featuresis part of system testing.

** Pl atform Commercialization ± M a ss Production

Once the platform is mature, the reference is provided to the handset manufacturer.

The customer brings up the reference platform at their factory for mass production Platform material

procurement takes place per the phone ID requirements.

Also, production software alignment has to take place for the software programming ³time´ which is

in seconds.

Eventually, the sales channels are activated. Phones are introduced in previously identified markets.

© 2 00 8 N ok ia V1 -F i lename .pp t / YYYY-MM-

DD/ Initials

45

Handset packaging and literature is printed and packaged as part of the phone sales.

This cycle of mobile handset development and deployment in the market typically takes minimum of

15months up to 24months.

© 2008 Nokia V1-

Filename.ppt / YYYY -MM-DD / Initials

46

By understanding cell phones through their market trend in different countries, how their market

segments are divided, what type of engineering they are developed from and how their life cycle is, it is

understandable how they have come to penetrate the social circles of human society and become an

economic powerhouse in the world today.



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