Microsoft announced at CES-2011 that its next generation Windows PC platform will run on ARM architectures. NVIDIA, Qualcomm and Texas Instruments were named as key ARM silicon partners. We think this is good news for stand-alone ARM applications processor vendors such as Texas Instruments (TI) and throws the company a lifeline at a time when the market is moving towards integrated solutions.

By our estimates, the market for stand-alone applications processors in smartphones contracted from 70 percent in 2007 to just under 30 percent in 2009. Vendors such as Qualcomm are driving the baseband-integrated applications processor market and these integrated processors are increasingly gaining acceptance in the smartphone market. The integrated approach is currently popular in the low-to-mid range smartphones but is gaining traction in the high-end as well lately.

Microsoft's decision to port the Windows PC platform to ARM architectures changes the market dynamics dramatically. However, it's too early to tell what impact it will have on Intel as Microsoft hasn't revealed any timeline for these new products. ARM hasn't yet revealed its 64-bit architecture and current generation ARM processors also cannot support graphics computing APIs such as OpenCL. It will take at least another 18-24 months for Microsoft to reengineer its platform for ARM architectures and to build a software ecosystem around it. This should give enough time for Intel to bring power-efficient processors to the market. Intel is expected to feature in Nokia's MeeGo smartphones and tablets in 2012 which we think would be a great psychological boost to counter ARM-based processor vendors.

The likely specs for Windows on ARM architectures are:

• CPU: Dual-core / Quad-core ARM Cortex-A9; GPU: ARM Mali-400 / Third-party GPU

• CPU: Multi-core ARM Cortex-A15; GPU: ARM Mali T-604 / Third-party GPU (Most likely configuration and leading chip vendors such as TI, NVIDIA and Samsung were already announced as licensees of Cortex-A15 cores)

• Custom ARM processor designed by Microsoft and its hardware partners

This move is a good news for NVIDIA, Qualcomm and TI as it opens up new opportunities. Qualcomm already has customer relationships with top PC vendors and is expected to leverage them to expand into the Windows PC ecosystem. This move equally helps the stand-alone applications processor vendors to revitalize their businesses and to compete for higher volume. Broadcom, ST-Ericsson, Samsung, Renesas, Marvell and Freescale could also potentially feature as future Microsoft's partners.

We believe diversified device and OS landscape favors chip vendors as they can avoid the risk of being sidelined by powerful vendors. With Microsoft's support, ARM chipset vendors can now look forward to new markets that were unavailable to them previously.

As smartphone shipments grow as a percentage of total mobile phone shipments, processor suppliers also have to revise their strategies to tap into this growth. Who is well-positioned? We think baseband vendors are well positioned to capture this growth given their leverage to work their existing OEM relations. To make the transition from the featurephone world to the smartphone world, processor vendors have to develop application processors and multimedia processors in addition to cellular baseband processors.

The game is no longer about slim modems. Based on our research many of the leading baseband vendors are missing the growth opportunities in the smartphone segment. Estimates in our recent report entitled “Can Baseband Vendors Translate Their Success into the Smartphone Market?” reveal that the cumulative smartphone apps processor unit shipment share of Qualcomm, ST-Ericsson, MediaTek, Infineon and Broadcom was just 21 % in 2009 despite their cumulative overall baseband unit shipment share of about 65%. What this means is that baseband vendors have not been too successful in converting their baseband design-wins into apps processor design-wins so far.

A chip vendor's success in the smartphone world comes from scoring design-wins at top-tier smartphone OEMs and supporting software platforms that have market momentum. This is one of the reasons why baseband vendors missed the smartphone boat as many of them were focusing on feature phone and basic phone segments. We think there is enough room for dynamism in the smartphone processor market as new entrants like Intel come into the value chain. If Intel acquires Infineon, as rumoured, that could put more pressure on stand-alone processor vendors, such as NVIDIA, that currently lack baseband products. Interesting times ahead. We’ll be watching how baseband vendors expand their value offering to crack the smartphone and other emerging devices markets.

Hear insights from Stuart Robinson, Director of Strategy Analytics’ SpecTRAX service, who will talk about the important trends in recent global cellular handset model announcements. Join us on Thursday 9th September for a complimentary live online webinar.

Topics covered by the webinar include:

• OS penetration; how many phones feature Android compared to LiMo, Windows and Symbian?
• Analysis of current spec trends; Bluetooth, touchscreen, QWERTY, form factor, screen & camera resolution….
• Shelf share analysis by region; which carriers offer the most Android phones?
• Typical specs of Android phone vs handsets running other operating systems

The webinar is targeted at existing clients of the SpecTRAX service as well as product planners, product marketers and portfolio managers across the industry.

Attendance to the webinar is free however pre-registration is required. REGISTER –>>>           

Date:                 Thursday 9th September 2010           

Duration:           30 minutes, followed by 15 minutes Q&A           

Time:                  2pm BST UK / 9am EDT Boston, repeated at 5pm PDT LA

Once we have processed your registration, you will receive a confirmation email message with instructions on how to join the event. Feel free to forward this message to your colleagues who may be interested in this webinar.

The number of mobile operating systems just keeps getting bigger and to our count close to ten platforms are now competing in this space. They include Symbian, Android, iPhone OS, BlackBerry OS, WebOS, MeeGo, bada, Windows Mobile, LiMo Foundation-compliant platforms, Brew Mobile Platform and Linux variants. The question that obviously comes to everyone's mind is who will win in this mobile software platform market.

There are some interesting angles to think about this.

• Can the smartphone market size accommodate this many platforms?

• Do consumers care about operating systems?

• Is it a zero-sum game or can there be a more than one winner?

• Everyone is talking about carriers becoming dumb pipes but what about handset OEMs? Will Google and Microsoft make handset OEMs as dumb pipes or add value?

• Should every handset vendor build their own OS? Can they cope with incremental mobile OS R&D costs?

• Can horizontal and vertical business models co-exist in the mobile industry?

• Is there enough developer support to address every OS?

• How many platforms operators can support?

We think R&D capabilities, scale, brand, and strong partner and developer ecosystem are necessary ingredients to sustain a long-term smartphone OS and only few of the above mentioned platforms check most of the boxes. Strategy Analytics estimates that smartphone OS vendors currently spend close to $100-$200 million on R&D on average and this is expected to grow incrementally.

Nokia (Symbian and MeeGo): 2010 will be remembered as a software transition year for Nokia and 2011 will see a settled software platform strategy with both Symbian and MeeGo (Maemo) getting much waited Qt UI and app frameworks. Nokia has a unique software strategy and is the only vertical vendor who is open sourcing its proprietary platforms. Nokia already has scale, brand, and R&D capabilities and if the company can excite the developer community and consumers with Qt then it should keep its smartphone lead for a long time to come. Nokia is well positioned to democratize the iPhone and BlackBerry experience to the masses. Nokia's software transition will be watched closely as competitors becoming stronger.

Microsoft: We believe Microsoft can not afford to lose in the mobile platform market given its synergistic importance to its other businesses and Windows Phone 7 Series (WP7 Series) announcement just reiterates that. It remains to be seen how WP7 Series platform will fare in terms of price points, hardware requirements, OEM support, developer and consumer reaction which can decide whether Microsoft can get the scale that is required to sustain a long-term smartphone OS. Microsoft will face a strong challenge from Google as both companies are targeting the same OEMs. Microsoft may position older Windows Mobile versions for low-end smartphone market but it remains to be seen how OEMs will react given more appealing nature of WP7 Series platform.

Android: Google and its partners executed very well so far and 2010 could be the Year of Android. Unlike Microsoft's WP7 Series platform, Android can also run on low-end chipsets which can increase its addressable market. Android and Symbian are the only mobile OSs that are targeting mass-market smartphone segment currently. This gives edge to Android to gain scale as handset OEMs push Android to feature phones. However some key risks like fragmentation and future Google moves that may cause friction to OEMs and operators will be watched closely. We also believe that the expanding size of the smartphone market should create enough opportunity for horizontal software platform players as Google and Microsoft currently lack high volume handset customers.

BlackBerry OS: RIM continued to gain with its market leading "Push" technology and security features. However, its web browsing and touch screen experience needs to be addressed. RIM already trying to fix the web browsing problem with new WebKit-based browser but touchscreens remain a challenge.

iPhone OS: Apple continues to win mindshare from developers and consumers alike and is well positioned to be a long-term player in the smartphone OS market. Apple's web browser is equally capable even if the trend shifts to web applications in the future. Apple may come under pressure from Android and resurgent Microsoft in the future but the growing size of the smartphone market should give enough room for iPhone OS to grow.

LiMo Foundation: Being a middleware platform and because of its governance structure, the LiMo Foundation currently lacks a direct relation with the developer community and currently depends on its operator partners for ecosystem. 52 LiMo-compliant handsets have been announced so far and 24 major global carriers are members of the Foundation. We believe that the LiMo Foundation's middleware platform is technically closer to Nokia's MeeGo and it remains to be seen how the Foundation will pursue its strategy given global OEMs are currently choosing Android.

Palm's WebOS: Despite seeming to have one of the best mobile platforms, Palm's limited geographical reach, and limited R&D budget could prevent the company from scaling as much as its competitors Nokia and Apple. Palm's lack of brand-awareness outside North America is not helping the matters. We believe Palm's lack of scale could hurt it in the future as its competitors become even stronger.

Samsung bada: Samsung bada's definition and market positioning remains still subjective given its kernel-configurable nature. It remains to be seen how Samsung's bada will keep pace with Android, iPhone OS, Symbian and others. Like Android and Symbian Samsung's bada also expected to target mass-market smartphones.

Qualcomm BREW Mobile Platform (BMP): We believe Qualcomm is positioning BREW as a low-end smartphone platform but it will face a stiff challenge from Android and Symbian as they are also trying to address the feature phone market. Qualcomm's BMP is also not supported by other chipset vendors but Qualcomm is expected to leverage its existing relations with operators and handset OEMs.

Despite the desire of OEMs to control their platforms, we continue to believe that the growing R&D costs to develop a smartphone OS and ecosystem around it could potentially force them to consolidate their efforts around licensable operating systems while also building OS-agnostic differentiating layers on top of that. Examples include Nokia (Qt / OVI), Motorola (Moto Blur), Sony Ericsson (UX), HTC (Sense UI), Samsung (TouchWiz) and LG (S-Class).

Strategy Analytics Exclusive Presentations at MWC 2010

Strategy Analytics is delighted to announce our presence at Mobile World Congress, the premier event for the wireless industry. We will be hosting our annual exclusive breakfast presentations, and invite you to attend one of our sessions that will showcase our latest research into the dynamics of the wireless market. This invitation-only breakfast event will provide insights into the critical threats and opportunities facing the wireless industry in 2010.

Mobile Broadband Traffic, Revenue & New Connected Devices  

Date

Tuesday 16th and Wednesday 17th February 2010*

Location

Expo Hotel, Calle Mallorca 1-23, Barcelona (same as last year)

(10min walking distance from the Fira de Barcelona where the MWC is taking place)

Registration Breakfast

08:00

Session 08:30 - 10:00

* Please note that this year the sessions on the two days will be identical, giving you the choice to select the more convenient time for you.

Managing the Traffic: Revenue Imbalance Notebooks/Netbooks, Feature Phones, Smart phones & Other Connected Devices

• Presentation One: A brave new world of connected devices. Which devices? Which OS? Which Brands for connected netbooks, notebooks, MIDs, ebooks?
• Presentation Two: The future of Apps: On/Off Portal & Managing the Tsunami of choices facing consumers
• Presentation Three: Managing the traffic explosion from over 1.3B broadband accounts
• SpecTRAX Global Handset Specification Database Demonstration

Each presentation is a unique opportunity to hear an objective market view from some of our senior analysts. Our events are free of charge but as we have limited space we ask you to register in advance by going to our website at: www.strategyanalytics.com/MWC2010.html

Please remember to indicate on which date you would like to attend. Please also note that copies of our presentation will only be made available to attendees and clients.

You will have the opportunity to meet our analysts after each presentation and/or can arrange a separate meeting during the Congress. Please feel free to forward this invitation to any of your colleagues if you think they would be interested.

If you are not going to be in Barcelona or if the timing is inconvenient, we would be happy to meet you at another time, just let us know! If you have any questions, please do not hesitate to contact us, otherwise we look forward to seeing you at the MWC in Barcelona!