The industry’s first cellular phone manufacturer has become another casualty of the highly competitive handset business. Oki Telecom Inc. has ceased manufacturing, sales and marketing all mobile phones in the United States.
Suwanee, Ga.-based Oki was a pioneer in the cellular handset industry. Involved with cellular technology since 1973, the company was the first manufacturer to receive federal type acceptance on a cellular phone in 1982. Oki supplied some of the first cellular equipment used in the Chicago service trial in 1978. In 1983, Oki’s cellular mobile phone was elected one of the “Products of the Year” by Fortune magazine.
Times have changed for the one-time leader of the cellular handset market. Oki could no longer compete in a marketplace that is seeing handset price points fall dramatically.
“It was a hard decision, but we had to face the reality of our future environment,” said Coby Sillers, former senior vice president of sales and marketing with Oki. “Competition within the CDMA handset business is severe. The CDMA handset business is quickly moving in the same direction the analog business did.”
Oki in late 1996 decided to push ahead with only one digital technology, Code Division Multiple Access, and subsequently was working to introduce a dual-mode handset. Like many CDMA handset vendors, Oki found developing its own chipset more complex than expected. This resulted in a sequence of delays in releasing the product, said Sillers, now president of Cherokee Wireless, a wireless infrastructure company outside of Atlanta.
Oki also was dealt a blow last summer when Canadian operator Bell Mobility replaced its $125 million, 36-month contract with Oki for a contract with Qualcomm Inc. Bell Mobility said it believed the product availability through Qualcomm was more consistent with its service launch schedule.
Oki’s handset finally was ready this month, but the company found itself with a heavy and expensive product that was not competitive with what existed in the market. It made the decision to scrap the product entirely.
In March, Oki, a wholly owned subsidiary of Oki Electric in Japan, also exited the analog handset business as pricing pressures became too great, said Sillers. A tri-mode handset capable of operating at CDMA 800 MHz and 1900 MHz as well as 800 MHz analog was scheduled in 1996 for commercial release in the second quarter 1998, but never went beyond the development stage.
Oki’s decision reflects the predicament many digital phone makers are facing. Price points are falling too fast for some to compete, say analysts, and the ax is set to fall on many more.
“Price is a key consideration, and only those manufacturers with the scale and internal cost structures will survive,” said Sillers.
Already, Northern Telecom Inc.’s Matra Nortel Communications joint venture recently closed its Global System for Mobile communications handset manufacturing plant and sold its research and development unit in Germany to Nokia Corp. because of continuing losses.
Richardson, Texas-based Siemens Wireless Terminals decided to scale back efforts in CDMA technology. Last year, it announced plans to introduce a handset during first-quarter 1998, but ended its development project in March and moved research and development efforts back to Munich, Germany. It opted to push ahead with GSM technology, indicating that it did not want to deliver a product that didn’t meet customers’ expectations.
Mitsubishi Electric Corp. of Japan early this month reshuffled its cellular phone business in the United States, forming a manufacturing partnership with Solectron Corp. to reduce the economics of manufacturing handsets. Mitsubishi will transfer to Solectron the wireless telephone manufacturing assets of Mitsubishi Consumer Electronics America Inc.’s Cellular Mobile Telephone division located in Braselton, Ga.
For CDMA, the issues are tricky. A number of manufacturers have chosen to develop their own chipsets rather than purchase them from Qualcomm. Even the large handset vendors, like Motorola Inc., have found the process painstaking, say analysts. And CDMA handset prices remain high, making subsidization for carriers and manufacturers difficult.
Sillers said there simply is not enough room for the number of competitors that want to enter the CDMA handset market.
“There have been to my count about 14 different manufacturers that said they wanted to develop a CDMA handset,” he said. “Carriers have told me they only want to do business with two or three manufacturers. I don’t believe all will survive.”
