CCS Insight gives its crystal ball an annual dust and polish

‘Watch out for China’ is among the main thrust of the analysts’ predictions for next year 

Phones with folding screens will be launched next year, but will be a small niche category until 2022. So says leading analyst and research firm CCS Insight.

This was just one of 100 high-tech predictions revealed by the CCS team at the firm’s 2019 & Beyond conference at the Institution of Engineering and Technology in London earlier this month.

CCS Insight’s motto is “making sense of the connected world”. Its predictions-fest is now a regular annual event at which the CCS team presents its vision for artificial intelligence, the Internet of Things (IoT), smart cities, smart homes and 5G. It also looks at new consumer devices, new media, the digital workplace and moves of key technology players such as Amazon, Facebook, Google, IBM, Microsoft and Tencent.

Observations

Presentations were given by CCS CEO Shaun Collins, Geoff Blaber (Americas), Martin Garner (Internet), Nicholas McQuire and Angela Ashenden (enterprise), Aicha Evans (chief strategy officer at Intel), Marina Koytcheva (forecasting), Patrick Spence (Sonos CEO), Ben Wood (chief of research) and Kester Mann (operators).

This report will look at Wood and Mann’s observations of the mobile sector.

One thing foreseen by CCS Insight’s crystal ball is that, in four years, smartwatches will become a hub for peripheral devices such as smart headphones and smart glasses that will connect to the internet when users don’t have their smartphones with them.

In a separate prediction that accessory manufacturers will cheer, the EU will rule in favour of integrated batteries being outlawed and for all portable devices to require removable batteries. CCS says the reason for this will be environmental, stopping devices being chucked away just because their batteries no longer work.

Trigger

CCS Insight chief of research Ben Wood explained to the audience how growth in the hardware market would be mainly driven by Chinese vendors, and that 5G would be a trigger for activity.

Wood reckons the arrival of 5G could be the last chance for struggling manufacturers to stay relevant. He detailed how mobile phones are the world’s top-selling electronic devices, with two billion sold this year – or 63 every second.

The huge popularity of smartphones might also give hope to struggling brands such as Lenovo, Sony and HTC.

“It will be interesting to see what Sony, HTC and LG do. If they don’t get 5G right, they could find it hard to continue,” said Wood.

He also spoke of changing consumer behaviour and how the emergence of new Chinese players such as Huawei, Xiaomi and Oppo were establishing new ground rules.

“Chinese manufactures now make up 40 per cent of total mobile phone shipments. This was unthinkable a few years ago. And these are top-notch devices.

“What they have been able to achieve is nothing short of remarkable. Huawei’s P20 Pro and Mate 20 are highly competitive devices.

“Oppo has a device with a mechanical camera that pops up when you need it. Xiaomi recovered from losing market share and is aggressively pursuing markets such as India. They are on their way here – and you better watch out.”

Wood: Chinese manufacturers will find strategies that bypass the USA

Habits

Changing consumer habits mean that refurbished devices could soon make up eight per cent of sales in Western Europe.

“The way devices are being sold is changing,” said Wood. “Devices are lasting longer and it is not absolutely necessary to change. There is an apathy from consumers toward devices.

To improve sales we can see refurbished devices being an area of growth.”

In three years, said Wood, the used value of a smartphone will be regarded as more relevant than the brand new retail price.

He predicted a growth in part-exchange schemes to boost the upgrade cycle, with more manufacturers offering discounts to encourage sales of new devices.

“This is good news for some of the players whose products have good residual values. There is an interesting similarity to the car market. You can lease an unknown brand cheaply but it will have a low residual value. Or you can choose a car of a recognised brand likely to be worth more at the end.

“I’m not going to fork out thousands of pounds for a mobile device without knowing whether or not the value will evaporate in depreciation. This will be a competitive differentiator for brands such as Apple and Samsung. How long will it be before we see these brands promote the fact that these devices have more longevity?”

Wood also touched on the current tensions between the USA and China. He reckoned Chinese manufacturers such as Huawei will be working harder to find strategies that don’t rely on trade with the USA, especially as their home market in China is big enough to support them.

The move from 4G to 5G is also set to turbocharge their opportunities to establish an operating system to rival Android, something the European Commission is keen to see to encourage competition for Android. Wood noted how Apple’s requirement for a 5G variant of the iPhone in 2020 could disrupt the timing of the company’s traditional release schedule.

Networks are expected to increase activity in refurbished handsets

Clockwork

“Apple releases a new iPhone every September like clockwork,” said Wood. “But we are not expecting a 5G iPhone until 2020.

Yet the pressure of meeting the requirement of a 5G product means Apple will have to change their launch cycle. So the 2020 iPhone will arrive earlier than that in the USA to meet the demand for 5G from carriers who are already launching 5G.”

Of course, 5G was the main topic of carrier conversation at the event. CCS Insight principle analyst Kester Mann spoke of the difference between the introduction of 5G and 4G.

He noted that 5G is being heavily pushed by the networks, whereas 4G was more manufacturer-driven.

“The first 5G networks are now a commercial reality. This is in contrast to the stagnant device market, which needs a major disruption to splutter back into life. Telcos are now awaiting supporting devices to start the latest generation of mobile services,” said Mann.

Big players

CCS previously predicted that the internet would be controlled by around 10 companies, such as Apple, Google and Facebook, who would push technology in the direction they wanted.

Mobile networks tend not to get a look-in. Of the 50 most innovative companies rated by Bostock Consulting, there are only four networks on the list.

“The usual suspects are there. But sectors such as pharmaceuticals, automotive and sportswear are ahead of the telcos,” said Mann.

“Telcos are not playing a greater role in shaping future technologies because they are older and tend to be wedded to ageing systems. Replacing infrastructure can take years, if not decades.

“However, telecom operators haven’t helped themselves. Many have been too risk-averse. They have relied on historically impressive margins and have refused to change. But the old cash cows of messaging and voice calls are less valuable. More than ever, they need to rethink.”

Mann: 5G’s big challenge will be cost of deployment

Challenge

Within two years, said Mann, at least five countries will have deployed an interconnected or shared 5G network.

He said 5G’s biggest challenge will be the time and cost to widely deploy the technology.  “In the UK, we have already seen estimates that it could require 10 times the infrastructure in addition to the fibre backhaul. A 4G network requires around 35,000 masts, whereas 5G will require 400,000 sites. Thus, we expect to see new deployment models of a shared 5G network to create a viable business model.”

Mann does not expect operators to charge a premium for consumer 5G services. “For all the noise, hype and bluster surrounding 5G, few networks have actually address d how they will charge for it. We think the conversations will evolve around offering big high-speed data bundles for a small increase in monthly fees, unlike the surcharge we saw with 4G.”

Repair and Refurb

Another prediction was that a European operator would buy up repair and refurbishment companies.

“The way people research and pay for devices has undergone significant change in the last four years. There is decoupling of the device from the airtime purchase as people are becoming more savvy. We found that one in 10 people own a second used device. We are also seeing a pent-up demand for refurbished devices and growth in refurbished and recycling phone providers.

“If operators can control recycling and refurbishment, they can take greater control of the customer purchase and develop tariffs that could include insurance, repairs, guaranteed residual value or upgrades.”

CCS Insight boss Shaun Collins is rather proud of the firm’s track record. He reckons the company pretty much nailed the prediction that revenues from Apple’s service element (such as iTunes and iCloud) would overtake sales of its Macintosh line of computers.

“In 2013, we saw that there needed to be some change in the market where companies such as Apple would think beyond their hardware business. Their success in what they call the services business is almost as big as Facebook.”

Collins sees China as a place for big developments, and he’s interested to see the impact the country will continue to have.

While Western woes may dominate headlines in the mobile sector, China is quietly infiltrating the western handset marketplace with brands like ZTE, OnePlus, Honor and, of course, Huawei.

“The effect is immense. China has ambitions beyond being a low-cost manufacturer, to being a technology leader.”

CCS predicted the rise of Huawei to become the second largest manufacturer in the world. China will make advances in AI and 5G, elevating the market to being more than just a manufacturing hub.

“China sees 5G as key to reinventing itself as a technology leader. Within four years we expect China to overtake the US in advancements in artificial intelligence. But China will still have a hardware industry,” said Collins.

“We predicted in 2014 that Lenovo would overtake Apple as the second-largest manufacturer when it was in fact Huawei. Nonetheless, hardware is still an area in which China are pushing very hard despite what we are seeing in the United States.”

Chinese manufacturers could establish a smartphone OS as a rival to Android

Responsibility

CCS has been on the money about 10 giants “owning” the internet. But with this power came “accountability and responsibility”, especially when handling vast quantities of personal data, said Collins.

“Apple, Amazon and Google, among others, really do dominate the web. But that means that they need to operate at a high standard, keep data safe and be trustworthy.

“Six months before anybody had heard of Cambridge Analytica, we predicted Facebook would be the first internet service provider to be regulated in the USA. We could be talking about any of the social networks.”

The post CCS Insight gives its crystal ball an annual dust and polish appeared first on Mobile News Online.

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