The Smartphone Manufacturers Are Turning into PC Manufacturers. But Should They?

October 31, 2011

Kevin Tofel from Gigaom seems to think that even though HTC has seen incredible growth so far, also proven by their latest quarter results, they might start seeing flat growth very soon, and I tend to agree with him on this. If they want to keep growing, HTC will need to re-evaluate their strategy very soon.

HTC has a few problems that will expand in the future, from higher prices compared to competition for similar specs, the rise of inexpensive smartphones from Huawei and ZTE, to lack of patents and having to purchase a lot of technologies to put into their phones, while others like Samsung can build them themselves.

But I think the biggest problem not just HTC, but also Samsung and others will face in the future, is the commodization of their devices. Worst of all? It’s not Android causing most of that. It’s themselves who are going down that path by following the strategies of the PC makers.

Just like in the PC market, they’re trying to flood the market with different devices that are actually more or less the same – all in the name of releasing something “new” to give them an extra temporary sales boost. But just like a drug, in time it starts losing effectiveness, and it ends up hurting them instead the more they do it. It dilutes their brands and confuses the customer, while reducing their margins and increasing the complexity of their business (thus rising costs).

HTC is one of the worst offenders here, but Samsung is doing it more and more, too. Take the Galaxy line for example. At first there was only one Galaxy – the Galaxy S – which actually meant something for people, and to a point, it still does, with the Galaxy S II selling even faster than Galaxy S. But Samsung is already on their way to erode the brand, by dividing it into 4 main categories, which I think it already confuses most people: Galaxy Y, W, R and S.

And now, they’ve already started splitting the S one, too – S II (original), S II LTE version, and S II HD version. That’s without mentioning the T-mobile version which has a very different CPU inside, so it’s sort of a different phone, too.

They’re going down a very bad path here, which will result in confusion for the customer (which version is the right one?), frustration (that a 5% better version is out 2 weeks later), lower profit per model, and higher costs of managing all these different devices, especially when you take into account that they have to (or should) upgrade all of them to the latest versions of Android, at least for a while.

I wonder if they even realize they are going down this path. My guess is they don’t and they can’t see the forest from the trees. They’re stuck dealing with this sort of strategy quarter after quarter, that they can’t even think about the long-term bigger picture strategy anymore.

The more devices they push out like this, without real identities, and looking much like 3 other devices they’ve already released, the harder it will be for people to recognize the devices themselves. HTC should follow Samsung’s strategy of releasing one blockbuster phone per year as their flagship. They might’ve tried doing that with Sensation, but I think they should’ve tried harder. They really need to focus hard on a device like this, to make sure it can’t be beaten for at least several months.

When Samsung releases a Galaxy S phone, it’s usually the best one for the next 6 months or so. Unfortunately, Samsung is starting to get addicted to this “sales boost” strategy, too, and if they keep releasing an updated version of the Galaxy S II every 2 months from now, people might be disappointed with the Galaxy S III, because it will look like just an incremental improvement compared to the latest upgraded model of GS II, rather than a dramatic improvement, which is what people are waiting for and what they want.

That sales boost strategy has kept the PC manufacturers on razor thin profits, and it’s what will happen to the smartphone manufacturers, too, if they keep this up. This is not about what OS they are using. They would do the same with any OS. It’s about how they go about making their devices every year. If they want to have devices that people love talking about and promote to their friends, and devices that have real identities, they need to make fewer of them, that are really good, and get updates for a long time.

Comments

  • AppleFUD

    The multiple models problem has been around for a long time. It was one of the first things Steve Jobs axed at apple, and it was a smart decision–reduce the number of products and make each product better. Too many companies are doing the slight model change per retailer and it makes little sense to a customer. I’m sure a big part of it is due to the retailers–they don’t want another retailer having the exact same model # so they don’t have to match the price. It’s hilarious when a retailer that does price matching tries to squirm out of it because their model has a different letter attached to the end, usually signifying only a color change.

    Ten slight variations of the same thing isn’t really choice and only drives the overall price up.

    Sure, we need some variety, but it’s getting way out of hand especially due to the carriers wanting each device to have specific tweaks just for them–as if customers are going to jump ship for a slightly different GSII. Makes you wonder just how stupid the people making these decisions are.

    I go with the carrier that gives me the best services, great price, doesn’t fubar my device, and allows me to use the device as I see fit without their interference. . .. but their control freaks like Jobs’ was so they are insistent that I experience their version of “shit.”

    And as we watch this we will see Android become nothing special. . . just a decent OS thrown on generic crap and that will lead to MS being able to step in and dominate the tablet market which will drive people to WP and we’ll end up with another ten years of stagnant crap. . . because Android OEMs just can’t be bothered to think and make something unique and creative instead of the same old shit or copied crap.

    So, Google. . . when you are in charge of Moto you had better step in and make sure some decent products get produced to push other OEM’s to do better. But I’m not sure that will happen, can’t say the design of the Nexus line is anything spectacular–sure it’s decent and has good specs but doesn’t have a design the makes you go WOW. . . like the N9 does–at least that’s my opinion ;)

    • https://plus.google.com/117702410245683101961/posts Lucian Armasu

      That’s a good point about not wanting to switch carriers over a slightly different phone anyway.

      The N9 is quite nice, if not a little too thick. But it remains to be seen if Nokia can produce a new design like that every 6 months or so, or with new models. Even Apple is starting to make a new phone design every 2 years now. But I do think Samsung and HTC have gotten a little lazy with their designs lately, and they should become bolder. But maybe they are at the end of this lifecycle for those designs, and we might see something new soon. I like the Droid RAZR from Motorola.

      • AppleFUD

        I don’t think they need a new design every 6 months or even every two years. A great design is a great design. I would just want the guts and screen upgraded and I would be a happy camper. Meaning, if they had a truly great design with options for a 3.5″ to 5″ screen then I’m OK with having the same design for a long time. . . but maybe I’m just weird.

        How many of us worry about the design of a laptop? They’ve become rather standardized with only minor changes over the years.

  • D-man

    Word. Well said.

  • Nord501

    I like they are doing this because in the end, we are the consumer will be the winner

    • Njh_09

      How do we win? The more new phones that hit the market, the less updates we receive for our current devices…this means that if you’ve had your phone for 6 months it’s already 3 months out of date and won’t be updated…yet you’re stuck with it for 2 years due to contract…

      • http://techniciablog.blogspot.com/2011/07/new-james-bond-goldeneye-game-to.html rahul roy

        very well said, agree with you!

  • http://techniciablog.blogspot.com/ rahul roy

    Yes they should!