Touch-screen devices performing many PC-like functions are making a push to take over the market in the coming several years .

BY SEAN SCANLAN, Special to AmCham

While both HTC and iPhone have touch screens, this may be where the similarities end. The iPhone technology, developed for Apple by a Taiwanese firm, uses a mesh of metal wires between two layers of glass, which registers a touch when the electrical field is broken. This means that a light touch or even finger movements close to the screen may inadvertently register on the phone. In contrast, HTC uses "resistive touch" technology - two layers of glass which respond to pressure as the gap between the layers is reduced through the application of a stylus or a finger. Other cell phone makers are expected to seek to emulate the convenient touch function with their own technology.

The great platform debate

While cell phones may tend to look the same, there is considerable variety inside. Currently five major operating systems can be found in the market. The next big debate in the industry, say many experts, will not be over which brand is superior, but rather which operating system. In terms of current market share, Nokia's Symbian dominates the market with 63%, followed by Microsoft with 13%, Linus (used in Japan and China ) with 11%, Blackberry with 9%, and Apple with 3-4% according to MIC's Pan. "I believe that there will be a platform battle among cell phones in the next few years," says Pan. "Apple's iPhone won't be a market leader because the OS system continues to be controlled by Apple. I anticipate it will have just 10% of the market and there won't be any iPhone killers or copycat versions as Apple will simply cater to consumers that are loyal to the brand."

The platform battle could be fierce as makers seek to differentiate themselves, though most phones will be offering identical functions such as Wi-Fi, GPS, and the ability to edit office documents. The biggest challenger in this market may be the recently launched "Google phone" which runs an open source, Google-developed, Android operating system. This OS system is freely available for use and modification by cell phone makers. The first smart phone to adopt this platform was T-Mobile's G1, produced for it by Taiwan 's HTC.

T-Mobile was eager to be the first to launch the Google phone because rival AT&T had already signed an agreement with Apple, meaning that iPhones could only be sold in the United States with an AT&T calling plan. Keeping up with the competition was the chief reason behind the early roll-out of this phone.

Google's Android operating system is open in two respects: the software is freely available to hardware manufacturers who can customize the program for their particular needs, and secondly the platform is open and mostly unregulated for third-party applications to run on the phone. Third-party applications, also called Apps, are small special programs that can do such things as turn your phone into a voice recorder, run games such as Checkers and Monkeyball, and even help you quit smoking. Apple has reluctantly opened its OS to third-party applications, but it still carefully monitors and controls them. Since their launch in July of this year, these little programs have turned out to be big business. Apple's on-line App Store has already seen 60 million downloads. In keeping with its corporate ethos of openness, Google has taken the opposite approach, even creating a platform where Apps can be freely uploaded and downloaded by any visitor to the site, much like YouTube. Still, not everyone is sold on the importance of platforms. HTC's Wang says the choice of operating system will depend on personal preference. Business people who frequently use functions such as Calendar and Outlook would naturally choose Windows Mobile, he notes, whereas those more familiar with Google functions may choose the Android platform. Furthermore, Wang considers a cell phone OS to be merely a component, not a major selling point. He regards all of the various OS platforms as quite competitive and able to hold their value in the future. More important, says Wang, will be old-fashioned "brand value" involving the development of consumer loyalty and trust - a factor that will even trump cost competitiveness.

Taiwan's role in the industry

Despite playing a dominant role in the world's PC industry, Taiwan occupies just 10% of the global cell phone handset market, according to MIC's Pan. Rather than reflecting Taiwan's relatively late entry into the industry, this disparity is attributed to the fact that cell phone production is still largely an in-house activity for world-leading firms such as Sony, Nokia, and LG. Many of these companies operate their own factories in China rather than sending out orders to Taiwanese firms. Cell phones have more in common with consumer electronic products than computers, and are typically produced through electronic manufacturing service ( EMS ) contracts rather than the OEM/ODM model used in the computer industry. The more limited form of cooperation represented by EMS will continue to be the business model dominating this industry as vital components within a smart phone tend to be controlled by overseas companies. For example, Samsung processors power the iPhone and Broadcom is working to integrate numerous functions (such as GPS, WiFi, and Bluetooth) into a single chip. These strongholds will mean limited opportunities for Taiwanese firms that do not operate their own brand. The challenges in this industry were experienced in the mid 1990s by leading Taiwanese IT companies such as Acer. Although it was an early entrant in this market, Acer made the mistake of investing in mass-market feature phones rather than high-end smart phones. When the company eventually reversed course, it was too late. Another fatal error was made by its affiliate, BenQ, in acquiring the cell-phone operation of Siemens in a deal that many analysts believe was overvalued. As a result, Acer and BenQ today have only a limited profile in this market.

The firm also worked with international telecom carriers such as T-Mobile, O2, and Vodaphone, with some of these cell-phone models offered with the carrier's trademark, as was the case with the T-Mobile G1 Android phone. Steady work on both the OEM and self-branded fronts has enabled the company to gain a 70% market share for smart phones operating the Windows Mobile operating system. In 2007, the company shipped 13.64 million units operating Windows Mobile; in 2008 it projects 21.76 million shipments, with accelerating growth expected well beyond 2012. That the company now also offers Google's Android operating system makes it an even more formidable competitor.

With smart phones making great strides in terms of technology and function, even offering some of the basic functions of the PC, it may not be a stretch to one day anticipate competition between these two different IT platforms. Indications of this growing battle include convergence in terms of screen size, as smart phones are around three inches while the first generation netbook computers were a tiny seven inches. A handheld unit with a five-inch screen and internet connectivity may pose a challenge to both smart phones and notebook computers. Another item of note is that HP recently re-launched the HP IPAQ, a hybrid cell phone and PDA that straddles the gray area between phone and computer. Other handheld products such as MP3 players, handheld gaming units, and other devices may also evolve in this direction. Increasingly, they enjoy the same Wi-Fi connectivity and many of the same PC interfaces as smart phones. If they were enabled with VoIP Apps, one might not need a phone anymore. In addition, Apple's iTouch has already done well, offering many of the same functions as the iPhone but without the phone function. When enabled with instant messaging and email alert functions, they have proved to be a reasonably competent communication tool.

But there is also a high probability that the future will be like the past, with many users continuing to regard their cell phones as highly personal possessions - and continuing to emphasize simplicity. Many consumers may be lured by dazzling new functions - such as the Google phone's integration of a compass with Google Maps so as to identify the direction in which you are walking - while others may remain loyal to a given brand, trusting the company to provide the best available technology and interface.