Batteries/Lithium-ion/Batt Cellular 01
Batteries for the Cellular World - How’s business?
By Shirley Georgi
The Bulls - If you picked up a recent report by Micrologic Research on cell phones, the good news to purport would be that cellular handset growth in 2002 is predicted to catapult by 19%. The study says “worldwide cellular sales were 387 million telephones in 2001, down slightly from 403 million in 2000, but predicts that 2002 sales will be up sharply to 462 million units.” The optimistic author, Jack Quinn, when reminded that his forecast is 10% higher than other forecasts, feels that many subscribers delayed upgrading their cellular telephone in 2001 because of the poor economy, but he said “they won’t put it off forever.”1
The Bears - But, the bears are still growling and making an appearance in the daily news. Allied Business Intelligence (ABI) reports that subscriber growth has slowed worldwide and the market for infrastructure has come to a grinding halt. Sales of wireless base stations will be down at least 15% this year, with 3G barely making a dent. “Globally, the industry is at a transition point. Asian operators are testing the waters with commercial 3G networks. In the Americas, operators are migrating away from TDMA technology.2 In Western Europe the saturated market has been stagnant.2
The number of cellular subscribers worldwide fell in 2001 but is expected to recover in 2002. The U.S. was surpassed by China in having the largest market for cellular phones. In Asia, both subscriber growth and the deployment of advanced cellular technolgy are taking the lead. Korea holds the global record for the highest-speed nationwide system. Japan has begun a deployment of a third generation W-CDMA system, also known as UMTS.1
In Japan, NTT DoCoMo, Inc. (the world’s first third-generation ‘3G’ mobile phone operator) reported that the mean 3G revenue per user in April - June fell 7.8 percent from the previous quarter to 7,800 yen ($65.43) a month. To stimulate 2G consumers to sign up, NTT DoCoMo has cut 3G fees by up to 55% for existing subscribers.6 The grizzly outlook has been blamed on limited coverage, pricier handsets and of course (as is always mentioned by nontechnical people who don’t understand how devices really function), poor battery life.
In Europe, ABI reports that operators are struggling with high debt loads and a subscriber base nearing saturation. In July, Telefonica, Spain’s giant telecom, retreated from costly European 3G mobile operations; the Company should save 2.4 billion euros as a result over the next four years.3 The western European market is an important player since this geographic area absorbs more than 30% of the world production of Nickel-metal hydride and Lithium-ion cells for all applications worldwide.4
In the U.S., the third generation of cell phones has not yet taken off and companies such as DoCoMo are being watched to see if 3G can be profitable, in spite of hefty license fees and infrastructure.
Batteries, the heart of the phone
A cellphone is only as useful as its battery. In fact, many cellphones are designed so that they don’t work if the battery is removed (or nonfunctioning in the unit) even when plugged into a power outlet. Calendar life is the core issue, especially for Lithium-ion (BD notes that the editor’s cell phone, which was rarely discharged, had its battery life limited to 2 and 1/2 years.) Of course, increases in power density and energy density are also constantly being investigated. Meanwhile, Lithium polymer finds more advantages in packaging for the extremely slim profile. Also deserving consideration are the dramatic improvements if and when small portable fuel cells can provide the portable recharging capability which might make some phone applications more convenient. Meanwhile, the greater use of larger screens in 3G technology alone with color has not made it any easier for the battery engineers.
Other Lithium battery technologies are slowly conquering hurdles, striving to become the next “standard” for portables. One such company is SION PowerTM, formerly Moltech Corporation. The Company says that it is “ developing an advanced energy storage system based on sulfur lithium chemistry (having its unique feature - a liquid cathode) with the potential to deliver more than double the specific energy of Lithium-ion batteries commonly used in cellphones and laptops.”
Although there are 22 million digital still cameras projected to be sold in 2002, in the ensuing five years, slower growth in sales is projected to take place when compared to growth in wireless camera phones. By 2007, there will only be 95 million digital still camera sales compared to 147 million camera phones.
One in five cellular handsets sold in 2007 will contain an embedded camera. Neil Mawston, Senior Analyst with Strategy Analysitics Global Wireless Pracice states, “Camera phones will be an essential tool in driving handset replacement rates in the next five years, especailly in sluggish markets such as Western Europe.5
Valence Technology, Inc. has developed the N-Charge PowerSystem using their Saphion TM Technology. The Company says, “On just one charge of the Power System, you can talk on your cell phone....non -stop for days.” The system features excellent run time with up to 5 days of continuous cell phone talk-time; it also has the capability of powering/charging two mobile devices simultaneously.
These technologies are just a sampling of what is on the horizon. Because both market projections and new battery technologies (including supercapacitors and fuel cells) will be presented and discussed at Power 2002 Conference, the BD editors plan to attend. So, “How’s business?” We hope to have more details, information and hopefully some additional answers after the late September meeting.
1 “Cellular 2002, A study of the Worldwide Cellular Telephone Market,” Micrologic Research, www.mosmicro.com
2 “Wireless Base Stations: Global Deployments & Revenue for 2G, 2.5G and 3G Systems,” Allied Business Intelligence, www.alliedworld.com
3 “Investors applaud Telefonica’s 3G retreat” by Daniel Flynn, Reuters (Madrid), 07/25/02
4 “Avicenne Battery Market Survey,” www.avicenne.com
5. “Strategic Perspectives on Cellular Camera Phones” by Neil Mawston, Strategy Analytics, 07/02/02
6 “DoCoMo <9437.T>3G APRU slips 7.5 pct in April-June” by Kiyoshi Kakenaka, Rueters, 08/02/02
7 “The Adoption of High-End Phones, Part 1: A Forecast for Multimedia phones through 2005,” The Shosteck Associates, Ltd. 05/30/02, www.shosteck.com
Phone Handset Sales
(as reported by Shosteck Associates)
“Handset sales are determined by two factors -subscriber increases and replacement sales. Worldwide, annual subscriber increases peaked during 2000 and 2001 at between 230 to 250 million. In subsequent years they will decline toward 100 million, reaching that point between 2005 and 2007. With this, replacement sales have become the major driver of the handset market,” stated Dr. Herschel Shosteck, President and Chairman of The Shosteck Group.
In reference to ‘replacement rates, the world replacement rate stood at 17.9 percent in 1994. As the analog to digital transition took place and handsets became smaller, the replacement rate peaked at 36-37 percent during 1998-2000. In 2001, it collapsed to 19.7 percent. “The replacement rate will increase from its low point of 2001, but remain below its peak of 1999 and 2000,” Dr. Shosteck said. “Because of this, and the continuing decline in subscriber increases, total handset sales, including replacement, will reach 455 million in 2005 with only a minor increase through 2007,” Dr. Shosteck continued.
To succeed in what will be a far more competitive handset market, some vendors plan to leverage their brand equities into consumer demand for a more function - and high priced - unit. Their unspoken assumption is that brand equity and more functionality will enable them to expand sales of higher priced units and, thereby, increase profitability.
“Five of the major handset vendors are dividing into two strategic camps,” stated Jane Zwig, Chief Executive Office of the Shosteck Group. “On the one hand are Motorola, Sony-Ericsson, and apparently Siemens. They are adhering to the conventional wisdom that handset sales must be anchored by low-tier units that draw the volumes of the mass market. On the other hand are Nokia and Samsung. They are introducing a new wisdom that handset sales can be stimulated, not by low-tier pricing, but by brand equity and greater functionality. The validity of these strategies will determine which handset vendors dominate in 2005,” Ms. Zweig continued.
Additionally, price differentials between old and new technologies are key in determining adoption of new technologies. This will be critical for understanding the adoption of 3G handsets.7