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3 Google Moves Signal End of Smartphone Era

Connect the dots among the three big moves Google made this month to dump Motorola, snatch up Nest, and make peace with Samsung, and what do you get?

I see the end of the smartphone era — or more accurately, the international consumer love affair with smartphones. The honeymoon is over. I'm calling it now.

Google's decision to sell Motorola's mobile assets (sans a majority of its IPs) to Chinese behemoth Lenovo isn't exactly signaling Google's defeat, or even America's defeat against China.

I see some overheated media reports blaming Google for failing to deliver its promise: “…to reinvent mobile hardware with Motorola's new phones, and directly compete with Apple by owning both mobile hardware and software.”

Just as much as I want to keep manufacturing jobs in America, I don't fault Google for this decision. The new Google-Lenovo deal shows a significant recognition by Google that the company has little to gain by hanging on to the smartphone hardware business.

Added values are in peripherals
Now, contrast this decision against Google's $3.2 billion purchase of Nest.

Nest's Learning Thermostat and Protect smoke and carbon monoxide alarm are both designed to connect to one receiver: the Nest app on a smartphone.

The value here isn't the smartphone itself, but in peripherals — the software and hardware that run Nest. The smartphone, a mere messenger for these functions, is fast becoming a commodity.

To be sure, I'm not forecasting the eclipse of the smartphone. Smartphones will still be ubiquitous for years to come, their value intact. But the smartphone's key function will be a modem, attached to a myriad of connected devices and technologies.

In short, the world is about to flip.

Gone is the conventional wisdom of cramming more and more bells and whistles into smartphones so that smartphones can morph into something else. Emerging is a new world where the existence of smartphones is a given. Added value, where new competition will unfold, is not in smartphones themselves, but in “peripherals” (some call it the Internet of Things) that will leverage the smartphone's connectivity.

Now, let's add these two events (dumping Motorola and buying Nest) to last Sunday's patent truce between Google and Samsung.

That move will “short circuit” the drawn-out legal wrangling we see today, as Francis Sideco, senior director of consumer electronics and communications technologies at IHS, told EE Times. The “eventual reality” perceived by both companies is that nobody wins hands down in any litigation.  While winning some individual cases and losing some, the net loss for both sides is in time and energy, and in the vast sums squandered on lawyers, Sidesco explained.

But more to the point, the significance of the Google/Samsung cross-licensing agreement, as Ron Epstein, principal at Epicenter IP Group, put it earlier this week, is this: “The [smartphone] platform battle — initiated by patent wars — is coming to an end.”

Clearly, both Google and Samsung are seeing the value of doing business together by trading patents.

The flip side of this détente, though, is the maturing of the smartphone business. If we were still in the early days of smartphone innovation, this wouldn't have happened.

The end of an era
The end of an era for smartphones is a difficult prospect to face. After all, the smartphone market has been the engine of the electronics industry in the last several years. And yet, think about this: For a few years, other than the screen size of a handset, the industry hasn't been able to significantly improve or differentiate the smartphones on the market today.

The state of the smartphone industry today bears a striking resemblance to the moment in 2005 when the novelty of notebook computers began wearing off and IBM sold its PC business to Lenovo.

The difference now is that the PC business then was predominantly owned by Taiwanese (and some Japanese) companies. The smartphone business for the next decade will be dominated by (mainland) Chinese OEMs including Lenovo, Huawei, ZTE, and many other names still unfamiliar in the United States yet.

As many of my engineer friends in China would tell me, Lenovo has a stellar reputation for technology, quality, talent, and discipline. (In contrast, from what I gather about ZTE, not so much.) Lenovo is also ambitious. Last year, it even assembled a team of engineers to start developing its own application processors for smartphones — in order to differentiate their products.

Nobody better take lightly what Lenovo can do.

In an environment that will be marked by a declined smartphone innovation, Apple's next move — virtually the first major initiative in the post-Steve Jobs era — will be huge.

This article was originally published on EBN's sister publication EE Times .

28 comments on “3 Google Moves Signal End of Smartphone Era

  1. Eldredge
    February 4, 2014

    Interesting – so the smartphone is being transformed into a portal for other devices. This approach makes perfect sense to me. I, for one, don't necessarily want to have every function that you can conceive of, compressed into one (ever increasing in size) 'hand-held' device.

  2. Daniel
    February 4, 2014

    “Google's decision to sell Motorola's mobile assets (sans a majority of its IPs) to Chinese behemoth Lenovo isn't exactly signaling Google's defeat, or even America's defeat against China.”

    Junko, as a customer or as a supply chain professional, we have to say that's a defeat of American companies. Recently Lenovo acquired x86 server business of IBM and Now Google's mobility division-Motorola also. So Chinese companies, who are well known for spying and poking to others business are going to be the major in these domains.  No matter, within a couple of years they may expand their business wings either by acquire other similar companies across various domains.

  3. prabhakar_deosthali
    February 5, 2014

    It shows that wahever is becoimng commodity , it is getting transferred to China, because China is known to manufacture commodity items at cheaper prices.

    The major value addition in today's world comes from the software offerings and services and  the giants like Google or IBM very well know this and will have full hold on this domain.

  4. Ariella
    February 5, 2014

    @Jacob You're saying this as a really bad indicator for security, as well as American manufacturing?

  5. Daniel
    February 5, 2014

    “You're saying this as a really bad indicator for security, as well as American manufacturing?”

    Ariella, personally I feel like that. We are surrendering our leading business to Chinese companies. On other hand, Chinese companies are eagerly waiting for a chance to capture US and EU markets, and later they will start all spying and hacking activities. Huawei caught for similar activities and out from US markets.

  6. Daniel
    February 5, 2014

    “It shows that wahever is becoimng commodity , it is getting transferred to China, because China is known to manufacture commodity items at cheaper prices.”

    Prabhakar, alternately US companies can start their production & assembling facilities in China to take these advantages.

  7. Daniel
    February 5, 2014

     
    “You're saying this as a really bad indicator for security, as well as American manufacturing?”

    Ariella, I don't know why US government are not acting up on these issues. I mean to find the basic reason, why companies are getting sold to Chinese counter parts. I feel government interventions are very much required to stop such things in future. Otherwise gradually the whole US market is going to be in Chinese hands.  

  8. Hailey Lynne McKeefry
    February 5, 2014

    I've watched with interest the evolution and revolutions around the Google buys Nest story. I've read that Nest is Google's next big play–the energy market (Forbes) . THat it's an artificial intelligence play (Venture Beat). That the company will likely close–nest that is (Wall street Journal). all this conjecture reminds me that no one, least of all Google, will be able to predict exactly how things will play out.

  9. ahdand
    February 5, 2014

    @Ariella: There are some issues in it but I feel that it's not that bad at all. I feel we can improve it for better usage for the future. 

  10. Daniel
    February 6, 2014

    Hailey, Google's growth story is amazing. Starting from internet search engine, diversifying in to cloud and various IT operations. Then Browser and OS for Mobile and PCs, finally in to hardware through Google Glass  and Nexus devices. In future, LED and Robotic services etc. who knows what else?

  11. Daniel
    February 6, 2014

    “There are some issues in it but I feel that it's not that bad at all. I feel we can improve it for better usage for the future. '

    Nimantha, what are those issues? Would you think government has to act or intervention is required at this point of time?

  12. Ariella
    February 6, 2014

    @Hailey so quite a few theories but nothing really defined.

  13. Wale Bakare
    February 6, 2014

    It's highly unpredictable with new innovations. That's one of the reasons why likes of Google and IBM sold off their hardware lines. As for smartphones, end of its era i dont think it is as soon as reported.

  14. Wale Bakare
    February 6, 2014

    >>China is known to manufacture commodity items at cheaper prices<<

    That's the trend in OEM business today. And, it would continue for sometimes. You cant blame the decision makers at the top echelon of the big businesses, it's pretty an indication that economy crisis still biting.

  15. Eldredge
    February 6, 2014

    @ Jacob – I'm not convinced that the US government is at all concerned about the sale of these kinds of technology sectors to China, so long as they are not export-controled technologies.

  16. t.alex
    February 8, 2014

    Google's selloff of Mobility is the right decision. This is not its core competency. However it bought a number of hardware companies recently, including Nest, and a number of robots. Perhaps it is focusing more on the software brainpower to make these hardware more intelligent.

  17. Daniel
    February 9, 2014

    “That's the trend in OEM business today. And, it would continue for sometimes. You cant blame the decision makers at the top echelon of the big businesses, it's pretty an indication that economy crisis still biting.”

    Wale, its good for their domestic market. But when it comes to others, Chinese manpower market is not that much attractive for MNC's.

  18. Daniel
    February 9, 2014

    “I'm not convinced that the US government is at all concerned about the sale of these kinds of technology sectors to China, so long as they are not export-controled technologies.”

    Eldreg, Motorola handsets are using by various US service providers (AT&T, Verizon etc). this handsets are using for both official and personal purposes, so when an official is making official calls through these handsets, chances are there to get moniterized or spying in future (remember Chinese people's are good in that). Similarly in most of the places IBM X86 servers are using and now it's in Lenovo's hand; there are also they can do similar things. No it's like a fear but it can be a reality by tomorrow.

  19. Wale Bakare
    February 10, 2014

    Does that mean selling off hardware business as critical like the IBM x86 servers not profitable?

  20. Eldredge
    February 10, 2014

    @Jacob – Perhaps these technologies could be exploited for nefarious purposes – all I am saying is that I don't get the sense that the US government considers that to be a serious risk. I could be mistaken (or maybe they are!).

  21. Daniel
    February 10, 2014

    “Does that mean selling off hardware business as critical like the IBM x86 servers not profitable?”

    Wale, Since Lenovo is a Chinese company they can make use of this low cost manpower. But it may be difficult for other companies IBM< Intel, Dell etc to grab this manpower at low cost.

  22. ahdand
    February 11, 2014

    @eldredge: Why do you feel that there is a huge risk which is being ignored by the US government ? Any specific reason behind it ?      

  23. Wale Bakare
    February 11, 2014

    Are the prominent Chinese manufacturing firms still making production on a low cost – Huawei, HTC, Lenovo and etc? What about sourcing for materials and manufacturing for others like IBM, Google, Apple? Would lowering cost of prodcution not possible for IBM and co?

    May be cloud and data center are better options. What are your thoughts?

     

  24. ahdand
    February 12, 2014

    @Wale: I think they should ban the Chinese copy manufacturing process. Its ruining the market and the brand as well. They sell using the same brand name for a lower cost but with no use at all other than the look.  

  25. Daniel
    February 13, 2014

    “Are the prominent Chinese manufacturing firms still making production on a low cost – Huawei, HTC, Lenovo and etc? What about sourcing for materials and manufacturing for others like IBM, Google, Apple? Would lowering cost of prodcution not possible for IBM and co?  May be cloud and data center are better options. What are your thoughts?”

    wale, any doubt about that? Huawei have design and R&D centre across the globe to make use of best of the talence, but their major production facility is at China.

  26. Daniel
    February 13, 2014

    “Perhaps these technologies could be exploited for nefarious purposes – all I am saying is that I don't get the sense that the US government considers that to be a serious risk. I could be mistaken (or maybe they are!).”

    Elderg, what I understood is US Military and defense sectors are using Motorola handset for various purpose like walky-talky, mobile communication and push to talk device.

  27. Hailey Lynne McKeefry
    February 15, 2014

    @Jacob, i think the secret sauce to organizations like Google and Amazon that grow beyond thier roots is that they have a deeper identity than just “internet search engine” or “online book seller”.  Google, probably, sees itself as “harnesser of the power of digital data” and Amazon sees itself as a digital marketplace, a one stop shop for modern life. I also think they they both see outside the box in terms of getting there. they aren't willing to stay on the normal path, but rather forge a new way to go forward.

  28. Daniel
    February 16, 2014

    “i think the secret sauce to organizations like Google and Amazon that grow beyond thier roots is that they have a deeper identity than just “internet search engine” or “online book seller”. “

    Hailey, you are right. Brand value matters more and can catch the market without much effort.

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