The crucial moment in the PC industry was the shift from vertical (of which Apple remains the final survivor and one-time “last to know”) to horizontal industry. (Andy Grove’s book is awesome on this.)
The best products at each layer standardized, cut prices to block competition and reach mass markets, and worked as complementary goods (“Wintel”) to enable rapid innovation across the whole system.
The suppliers of layers killed the vertical guys (Burrows, IBM, DEC, Sun) and the overall industry grew vastly.
Is the same thing happening in mobile? Already the big OEMs have mostly disgorged memory and CPU design/build (even Apple’s A4 is an ARM-design), big OS plays are sweeping horizontally.
The superchips from China are attacking with even more turnkey standardization than anything seen before — MTK and Spreadtrum make it braindead simple to ship phones. It is a hugely ODM-friendly proposition.
Even Android plays into this — a simple, free OS that can be standardized and shipped on mix-and-match phone designs. And Qualcomm is hoping Snapdragon runs the table (but watch for STE and MTK!)
Huge new OEM brands have sprung up from this China Chips Wave already across India, China, Africa… Android as a freebie OS is actually going to weaken LG/Samsung/Nokia here even further. The average PE of ODMs is now about 0.8x the average PE of branded players according to Nomura Research. Lower premium for the “we can do it all” brands.
So far this story sounds like the PC storyline exactly.
What could be different?
One thing won’t be different: a fully vertical solution will not own the total market (i.e., that iPhone rules the world the way iPod rules the music world…in the US; why not? because mobile is more global and because operators collectively are more powerful than Apple, which is not true in music).
So what *could* be different?
1. A technology change could sweep everything aside the way chip design revolutionizes console games every so often, or form factor *did* in mobile (brick, bar, flip, qwerty, touch) and could again (voice? eye ui?).
2. Nokia&MS&Skype could roar back with an amazing response the way Windows 7 on PCs or Qualcomm Snapdragon or 45 nanometer chips for Intel made big shifts.
3. Android could splinter. MSFT controlled Windows, not so GOOG. Amazon is going all out for 40% of US Android. The 80% player in the world’s soon-to-be-#2 smartphone market (China Mobile) has their own Android flavour too — OPhone. Google had hoped to block MSFT or AAPL from “owning mobile”. Check. But will they own anything?
4. Facebook phone. Why bet against these leprechauns?
5. PC-Phone convergence. Jobs: “the PC era is ending”. But so is the phone era — iPad, iPod, Android Tablets, Kindle, Internet TVs. Maybe one of these really will get hit by intense MSFT/HP/Dell response.
6. Something led by a China player. Think of when Sony bought Hollywood, 2011.
Sound crazy? Well surely you remember 2006, when we all thought Google was going to overtake Microsoft in market cap.
They are still laughing about it in Cupertino.
Amol Sarva is founder and CEO of Peek.
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