Rise Of The Handset ODMs

How efficient is it to build a commoditized piece of hardware, like a mobile phone handset, in Finland or the US? The answer is: not efficient enough. More and more handset fabrication is being outsourced by the big brands (Motorola, Sony-Ericsson, etc) to cheaper unknown developers in Taiwan and China. ( I've posted about this before). Historically, the big brands have done the design themselves, and just had the handsets built by contract manufacturers, and the marketing and branding still stayed with the big name. Now, a new paradigm is emerging, and ARCchart research discusses it in their paper on how ODMs (Original Design Manufacturers) are designing phones, building prototypes, then selling the completed item to the big carrier brands for them to market as their own. About 8% of handsets are currently made by ODMs and BenQ, GVC, HTC, Arima and MicroCell are the largest examples. What they do is akin to a construction company building a house on spec. An increasing role will be played by ODMs, as platform companies (MSFT, Palm...) can access cheap phones that use and promote their platform. These platform companies can issue free "reference designs" which make it even cheaper for the ODMs to build phones so long as they adopt the platform of the reference design. Since ODMs have few brand aspirations of their own, carriers also are attracted to ODM phones (completely cutting the big MFG brand out of the loop) because these handsets are badged with the carrier brand instead of Nokia, for example. Carriers have often been frustrated that customers think of their handset as a "Nokia phone" instead of a "T-Mobile phone". Now imagine the attractiveness of ODMs to carriers with a platform (Vodafone Live!, iMode, etc.)

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