Why digital device shipments are still impacted by lower demand

The consumer electronics and mobile device vendors have experienced a significant slowdown in demand, due to a number of related factors that result in the ongoing downward trend. This is a global phenomenon, where few markets across the globe are likely to drive significant new growth opportunities.

The combined personal computer (PC), media tablet and smartphone markets are on pace to record 0.9 percent growth and eventually reach 2.28 billion units in 2018, according to the latest worldwide study by Gartner. The PC and tablet market is estimated to decline by 1.2 percent in 2018, while the mobile phone market is forecast to increase by just 1.4 percent.

Digital device market development

"The PC market is still hindered by the undersupply of the DRAM market for all of 2018, due to the lack of new wafer capacity coming online. As a result, PC vendors will continue to increase their prices throughout 2018," said Ranjit Atwal, research director at Gartner. "Larger screens and more graphic boards also mean rising costs, adding to the bill of hardware materials for businesses and consumer buyers."

While the PC market is price-sensitive, Gartner is anticipating business user demand migrating to high-end PCs -- such as ultramobile premium devices -- where the overall value is better. Gartner now estimates that shipments of ultramobile premium units to increase by 12 percent in 2018.

The next major shift in the PC market will be marked by the end of support for Microsoft Windows 7 in January 2020. "It is becoming paramount for businesses to migrate to Windows 10 as soon as possible, and certainly by the end of 2019," said Mr. Atwal.

North America kicked off the first Windows 10 migration phase in 2015 and will complete around 2019. Western Europe is increasing its adoption in 2018. However, in China, Japan and other emerging regions, migration plans are shifting from 2018 to 2019 as they continue to prepare for inherent complications in changing process and procedures for Windows-as-a-service.

While the global device market is affected by macro-economic factors and technology developments, it can also be influenced by the Chinese device market alone. "China accounts for over 20 percent of global spending on devices so any changes occurring there can have a significant ripple effect globally," said Mr. Atwal.

With nearly 1.9 billion units to be shipped in 2018, mobile phones are the main influencer of the global digital device market growth. In China, mobile phone sales declined 8.7 percent in 2017 to 428 million units, but are estimated to grow 3.3 percent in 2018 -- representing 23 percent of total mobile phone sales this year.

Outlook for Asia-Pacific upside growth

The traditional PC market in China is on pace to decline by 1.7 percent to 38.5 million shipments in 2018, representing 21 percent of global traditional PC shipments. According to the Gartner assessment, the reduction will come despite China being business-dependent, with two-thirds of PC shipments coming from the enterprise and commercial market segment.

"The downward trend that China is experiencing is undoubtedly affecting the worldwide device market," said Mr. Atwal. "China is an interesting country to watch this year. The continued roll-out of a Chinese version of Windows 10 in the second half of 2018 as well as Apple iPhone's replacement cycle expected through 2019 will generate demand."

CityFibre research says UK is doing terrible job at connectivity

Research commissioned by serial-moaner and sh*t-stirrer CityFibre claims the UK is falling way back in the connectivity ranks, with broadband slower than on Madagascar.

We strongly suspect the wording of the research twisted certain perspectives and answers, CityFibre does of course gain from frowns directed at the mainstream telcos, but it is not difficult to believe the statistics. The research suggests the UK ranks 35th in the world for broadband speeds, as the country still relies too much on copper infrastructure instead of the futuristic fibre alternative.

“For too long the UK has been held back by a deliberate lack of investment by BT Openreach in fibre infrastructure,” said Greg Mesch, CEO of CityFibre. “Although companies like CityFibre are building the networks that will give millions of homes and businesses access to full fibre broadband, providers continuing to advertise copper-based connections as ‘fibre’ is leaving people completely confused about what is on offer.

“With the way we work increasingly blending our home and work lives, it has never been more important for people to understand what broadband connection they really get at home.”

Looking at the research statistics, 78% of the respondents feel slowed down and frustrated by their internet connection, a number which increases to 82% with homeworkers. Again, these figures will have been twisted by the working of the questions, but as a homeworker your correspondent can confirm this is an issue. 99% of those who work from agree a faster internet connection would be more beneficial to their working lives.

The benefits of working from home are clear, though connectivity barriers are starting to become more apparent. The intensity of work programmes will soon get to a point where copper based infrastructure becomes more than a hindrance. Unfortunately for the UK, fewer than 4% of homes currently have a fibre connection, and that is using statistics from the government’s Future Telecoms Infrastructure Review (FTIR). This 4% compares to 71% of homes in Spain and 89% of homes in Portugal.

The extremity of what CityFibre is saying should be taken with a pinch of salt, the picture of Coppersaurus is a prime example of trolling behaviour from the telco, but it is not wrong. The UK is falling behind, and while the FTIR does look promising, now is the time for action not more investigations. As Matthew Howett of Assembly said at this years Connected Britain event:

“If you could rollout out connectivity through reports and investigations, Britain would have faster broadband than Japan and Korea.”

Slowdown, don’t know what you’re talking about – Huawei

Huawei has reported its numbers for the first half of 2018, defying any trends there is a slowdown in the global telecoms and technology industry.

Over the course of the six months, Huawei brought in total revenues of roughly $47.66 billion, a year-on-year increase of 15%, while operating margin was 14%. Hints of recovery at competitors Ericsson and Nokia, while finger pointing from paranoid politicians around the world make the achievement a bit more impressive.

Huawei does not breakdown the results for the individual business units, but it was able to provide details of the wins throughout the period.

Looking in the carrier business, end-to-end 5G solutions and Intent-Driven Networks and cloud data centres are the talking points. 4G might not be the big spender of yesteryear, but it does seem to be a win, as Huawei points to the continued evolution of LTE as a money maker over the period. Perhaps this is an area the super-vendor will have to rely on while it launches PR campaigns to remove uncertainty in its appropriateness for 5G deployment.

With Nokia announcing a bountiful $3.5 billion agreement with T-Mobile US, the market-leading Chinese firm might have to miss out on the beginning of the 5G spending splurge due to continued questions over its impact on national security. The US telcos look like being the first to start handing out contracts, though Huawei has an trump card few an compete with in its domestic market. Being in the preferential position in China will certainly have benefits in the long-run.

Elsewhere in the world, Huawei’s pedigree might keep it in a good position. It is under threat in the US, perhaps due to the fact networks are not reliant on Huawei today; everywhere else is a different question. In Europe, Huawei has been remarkably successful, meaning the foundations it has built in today’s networks provides somewhat of a shield from political repercussions. Mark Evans, CEO of Telefonica UK, commented his business wasn’t overly reliant on Huawei, Nokia and Ericsson are the favourites here, though he wondered whether this would be the case for competitors.

Huawei is under the spotlight right now, but with 15% year-on-year growth figures, you have to wonder whether global trends are even bothering Ren Zhengfei and his cronies in the slightest.

LoRa bags Tencent as backer

Chinese internet giant Tencent is the latest company to join the LoRa Alliance, adding credibility to the technology which has perhaps been viewed as substandard to NB-IoT.

Tencent said in a statement it has been investing in LoRaWAN, most notably in building a LoRaWAN network in Shenzhen with local partners, but also in providing  device-edge-cloud LoRaWAN solutions on its network for a wide variety of IoT application and end users, such as government public services.

“It is clear that LPWANs are essential for the IoT technology and applications, and the market is quickly growing in China, especially in areas like government public services, industry manufacturing,

personal IoT devices, etc,” said Hongtao Bie, Vice President of Tencent Technologies.

“LoRaWAN has seen rapid growth, and we feel it is highly complementary to NB-IoT in the LPWAN market. Joining the LoRa Alliance will allow us to influence LoRaWAN development, advance IoT adoption, and strengthen our cloud business by building close partnerships with other LoRaWAN vendors around the world.”

The pros and cons of LoRa in comparison to Sigfox and NB-IoT have been much debated over the last few years, though it does seem NB-IoT is winning out. With the majority of telcos throwing weight behind NB-IoT, the influence of non-cellular technologies is starting to be diluted. There will of course be benefits with technologies such as LoRa, campus connectivity for unlicensed spectrum is one, but as data usage ramps up you can see why the telcos are nervous.

The danger lies with mission critical. LoRa might have a cost advantage, but without the licensed spectrum option, the telcos are justifiably tentative considering the potential damage to already battered spreadsheets. There are of course examples of telcos marrying the two technologies, Orange is producing some interesting initiatives in this area, though LoRa is not necessarily making the impact it had in mind. Maybe it is because it is a proprietary technology?

There will of course be use cases for the technology, and being able to throw around the Tencent logo as a supporter will also help.

First-gen 5G smartphones will be chunky and guzzle power

Reports of Huawei choosing a supplier for large heat dissipation sheets all but confirms the first wave of 5G smartphones will be chunky and guzzle power.

Huawei wants to be among the first to launch a 5G smartphone and plans to do so in less than a year. Industry rumours put the release around June 2019.

The company is said to have decided on Taiwan-based Auras Technology for its cooling modules. While refraining from commenting directly on the rumours, Auras Chairman YS Lin said that smartphone manufacturers will require higher performance thermal solutions for 5G.

Huawei is said to be using large (for smartphone standards) 0.4mm copper sheets from Auras to dissipate the heat generated by 5G’s high transfer rates.

Copper sheets are more costly than graphite sheets used in today’s smartphones. This cost will likely be passed onto the consumer, but it’s doubtful many didn’t expect to be paying a premium for early 5G devices.

A decision to use large copper sheets alone will increase the thickness of first-gen 5G smartphones. In the pursuit of slimmer devices, current smartphones leave scant room for larger components.

Huawei's rotating CEO Eric Xu said the first generation of Huawei’s chips will provide over five times greater performance than 4G chips but at the cost of power consumption around 2.5 times higher.

This increased power consumption will require the battery to be made larger or performance will likely be reduced from previous devices.

Huawei’s recent devices such as the P20 and Mate 10 have gained notoriety for having some of the longest-lasting batteries available. Part of this performance is from the AI optimisations provided by the dedicated chip in its latest devices which the company may be able to improve further to limit battery size increases.

A reduction in battery life would still put Huawei ahead of some of its competitors, so it has more room to play with here than many rivals. Some manufacturers are working to stricter constraints based on their current 4G devices.

New generation launches often marred with issues to overcome. Aside from early-adopters willing to put up with these initial problems, it’s likely consumers would be smart to wait until 5G devices and networks have matured.

Do you foresee any problems with first-gen 5G devices? Let us know in the comments.

Senator floats new ideas for US regulation, criticizing inability to adapt

Democratic Senator of Virginia Mark Warner and his staff have penned new ideas for the US technology regulatory environment, pointing the finger at inadequacies and weaknesses in the current system.

The paper, first seen by Axios, puts forward a twenty-point plan for fighting online disinformation on social media, while also suggesting new rules which sound somewhat similar to recent GDPR. The ideas will unlikely be welcomed by the big boys of the technology world who, on the surface, preach the benefits of consumer privacy, but have been battling the consequences of regulatory changes on the advertising spreadsheets.

“The speed at which these products have grown and come to dominate nearly every aspect of our social, political and economic lives has in many ways obscured the shortcomings of their creators in anticipating the harmful impact of their use,” the paper reads. “Government has failed to adapt and has been incapable or unwilling to adequately address the impacts of these trends on privacy, competition and public disclosure.”

Fake news and disinformation is of course a dominant feature of the paper, it is a political hot potato at the moment, but in addressing consumer privacy, Warner is perhaps taking an unusual stance for a US politician. Many politicians in the European markets are sensitive to privacy and data protection, but this is not an overwhelming trend in the US unless there are PR points to win. The Cambridge Analytica scandal highlighted the shallowness of point-scoring politicians, but also the inability for rule-makers to understand the digital economy. The ‘Senator, we sell ads’ comment from Facebook CEO Mark Zuckerberg will not be forgotten easily.

But in Warner, privacy advocates might have found an ally. Warner is a regular critic of the technology industry and the apparent abuses/shortcomings of the companies which profit so readily from the freedom embedded in social media. The stalking of consumers online is an example Warner cites, admitting there are benefits though a lack of education on how the digital economy actually works has created a naïve user;

“Users have no reason to expect that certain browsing behaviour could determine the interest they pay on an auto-loan, much less what their friends posts could be used to determine that,” Warner notes.

Warner’s plan is to encourage transparency. For fake news, this could mean stating the origin of the news or labelling bots. It is an interesting idea, but due to the pace of development in AI and the effectiveness of VPN’s these could be very difficult objectives to achieve. Should such ideas make their way into policy and legislation, it would present a massive headache to the internet giants. Making these platforms liable for any disinformation should also be a huge worry.

Another idea is that of ‘information fiduciaries’. Originally proposed by Yale Law Professor Jack Balkin, certain services providers should be held to greater level of accountability because of the user dependence on their, such as search engines, and should pledge to not utilise or manipulate data for the benefit of the platform or third-parties. This sounds like a very interesting idea, but considering the US is a country defined by capitalism, Warner will struggle to get mainstream support here.

The final area we would like to address is the suggestion of new regulations which mirror GDPR in Europe. This is one which will likely receive a significant amount of attention for lobbyists, as anyone who was involved with making organizations GDPR-ready will know the heartache which was felt. Facebook is one company which pointed towards GDPR as a reason for less than favourable financial results, therefore the suggestion of bringing these rules across the Atlantic will surely be a kickstart to the lobby machine.

The ideas presented by Warner are wide-ranging, and in fairness, the cons are discussed in detail. These are not hard recommendations for the future regulatory-framework of the US, but ideas which need to be assessed. The US is not alone in its inability to effectively and fairly regulate the technology industry, or protect the consumer, but conversations do not seem to be taking place to understand how rules need to be adapted.

As mentioned before, Zuckerberg’s simple explanation of how Facebook makes money to Senator Orrin Hatch highlights one of the more worrying aspects of government today; the people supposedly in charge do not understand the basic concepts of the digital economy. The shortcomings are very apparent, and something needs to be done to ensure growth of the industry does not come at the expense of the consumers experience, safety or privacy.

Warner’s ideas will probably be received as extreme, but it should serve a good purpose; the conversation will be taken forward.

S9 halts Samsung run of progress but semiconductors stand strong

Samsung’s run of reporting record quarterly results has come to an end as sluggish sales for its flagship S9 device hit a wall.

Analysts had been predicting this would be a tough quarter for the device, some believing this would be the weakest launch for years, and it appears the fears have become reality. With sales of roughly $52.1 billion for the three months, a decline of 4% year-on-year, Samsung at least offered somewhat accurate guidance in a note a couple of weeks ago.

“Second quarter revenue fell due to softer sales of smartphones and display panels, despite robust demand for memory chips,” said Samsung in the earnings statement. “The continued strength of the Company’s memory business contributed to the higher operating profit. Net profit was little changed from a year earlier due to higher income tax.”

While this is certainly not an ideal situation for the business, at least it is not alone. The iPhoneX has also been experiencing sluggish sales, as the continued trend of flat innovation and limited differentiation continues. Apple might have been able to avoid the dip over the last couple of years, selling on its brand more than product innovation, but it seems not even the iLifers can continue to blindly follow the iChief down the trail of mediocrity any more. No-one is permanently exempt of global trends.

For the short-term future, the story is unlikely to change significantly, but there is a light at the end of the tunnel. With 5G networks set to be switched on over the next couple of years, manufacturers will soon be able to begin a refreshment cycle of devices, with flagship products being marketed as ‘5G Ready’. The consumers insatiable appetite for data and the need for speed will likely spur on the need to update devices.

This might not be the best time for the devices division, Samsung does at least have the burgeoning, if not as sexy, semiconductor unit. The NAND and DRAM markets continued to be big earners for Samsung, despite commenting on weak seasonal demand. With global cloud trends continuing to surge, front-line suppliers to the data centre industry are not going to be going hungry any time soon.

For servers, demand for SSD for data centres is forecast to remain strong, while for enterprise, adoption of high-density server SSD over 8TB is expected to continue. The adoption of SSD is expected to expand into more sectors and all product segments are projected to use more high-density eStorage, perhaps explaining the South Korean drive for innovation in the semiconductor market.

According to Yonhap News Agency, the South Korean government has pledged roughly $1.34 billion to the semiconductor industry over the next ten years, to support the country’s position in the global standings, but also to capitalise on the expected growth in the segment. The semiconductor space is considered to account for roughly 20% of the country’s exports.

“In order to have South Korea maintain its reputation as the world’s top semiconductor powerhouse, we will support the development of the chip industry by focusing on three strategies,” said Paik Un-gyu, Minister of Trade, Industry and Energy.

The three pillars of the strategy are the development of next-generation materials that will replace existing memory chips, the seeking of combined growth of fabless and foundry businesses, and hosting production lines of global semiconductor companies. Samsung will almost undoubtedly benefit from government interest in this area.

Samsung’s flagship business unit, its smartphone division, has had a rough couple of years, owing to a global slowdown on devices and also its own engineering ‘difficulties’, but this decline is not something which we should be surprised at; the writing has been on the wall as consumers start to favour refurbished or second devices, while also extending the lifecycle of their current devices. But on the positive side, Samsung is collecting profits through diversification.

Investors will moan about the deficit in sales and profits, but a burgeoning semiconductor division and a device refreshment cycle on the horizon, it could be in a worse position.

Europe gives thumbs up to Telenor simplification sales

The European Commission has given its blessing for Telenor to offload assets in Eastern Europe to Dutch financial and investment group PPF.

The Telenor business units in Hungary, Bulgaria, Montenegro, Serbia will now transfer into the PPF portfolio, for a cool €2.8 billion after the bureaucrats concluded there are direct risks to competition. The initial concern had focused around the existing PPF portfolio, which features O2 Czech Republic and Bulgarian broadcast company Nova Broadcasting Group, though little or no cross-over was found.

“The Commission found that the proposed transaction would raise no competition concerns,” the Commission said in a statement. “First, it would not give rise to horizontal overlaps, as the companies’ activities are confined to the different territories in which they hold their respective telecommunication licenses.”

Another area of concern was the wholesale international roaming and wholesale mobile and fixed call termination services and the downstream markets, though the Commission stated this would be ‘unproblematic’.

The new will be welcomed by Telenor, which has been looking to simplify its business operations, consolidating spend in its Nordic and Asian businesses. The headline of this strategy is focused around restructuring and a reduction of OPEX, though offloading non-core assets is generally a theme which goes hand-in-hand with such initiatives. Discontinued operations over the last couple of months have included Telenor India, Hungary, Montenegro & Serbia and Bulgaria, Telenor Common Operation, Telenor Microfinance Bank and Telenor Banka.

Looking at the last financial results, total revenues declined by 1%, though subscription numbers in the core markets are heading in the right direction. In Norway, and across Scandinavia on the whole, numbers were solid if not glorious, though Malaysia, Pakistan and Bangladesh all grew subscriber bases. Over the course of the quarter, two million subscriptions were added to the ranks, taking the total up to 172 million.

Prepare yourself for the wave of 5G wins, first up, Nokia and T-Mobile

With the US striding confidently and vocally towards 5G, Asia quietly building the enterprise business units and Europe patiently watching for errors, prepare yourself for numerous emails and declarations about 5G customer wins.

Nokia and T-Mobile US are the first for a while to be boasting about 5G, but we think the floodgates are creaking. In all fairness to Nokia, this is certainly a deal worth shouting about. CEO Rajeev Suri has been promising 5G will be the saviour of the lumbering Finnish business, and a $3.5 billion agreement with one of the world’s more aggressive telcos is a good start. More will have to be done to turn the fortunes of the business, but good going.

“Nokia and T-Mobile will advance the large-scale deployment of 5G services throughout the United States,” said Ashish Chowdhary, Chief Customer Operations Officer, Nokia. “This is a testament to our companies’ strong and productive working relationship, one which has produced several important technological milestones in recent months, and which now allows us to make 5G a commercial reality.”

While the news will come as a welcome relief to a few in and outside of the business, some may wonder whether it is a couple of days too late. While a slight share price decline after quarterly results is nothing to be too surprised about when Nokia is concerned, a couple could ponder whether their investments would have been saved slightly if this announcement had come prior to the earnings call last week. A 10% decline from top to bottom is not necessarily the end of the world, and while some might be slightly miffed about a slight hole in the bank account, such is life occasionally.

As part of the agreement, Nokia will help build T-Mobile’s nationwide 5G network, Nokia’s end-to-end 5G technology, software and services portfolio, including commercial AirScale radio platforms and cloud-native core, AirFrame hardware, CloudBand software, SON and 5G Acceleration Services. While Nokia will certainly be benefiting from a Huawei shaped hole in the US ecosystem, there have been comments over its ability to provide a full end-to-end solution. The battle between Ericsson and Nokia will be the biggest in the US, though with Nokia’s software capabilities, some might put it just a nose ahead.

The US is a big prize for the vendor who can gain early traction in the market, though we suspect this might be the type of story which runs week on week. 5G spending is almost a reality, and while there might be a few worries CAPEX will not be as high as previously thought, it will come as a welcome relief for though who have been navigating the baron seas between 4G and 5G.