Google formally joined the cell phone industry by announcing its Android.
On November 5, 2007, Google announced Open Platform for Mobile Devices, so called Android platform. A week later, Google announced the Android Developer Challenge and released Android SDK.
Microsoft CEO Steve Ballmer said Android is just a few words on paper right now and it is hard to make any comparison. This statement has certain truth in it than just a defensive spin. Among the one billion annual global shipment of cell phone handsets today, a little more than 12% of them are smart phones. It took Microsoft 10 years to reach the 12-month volume of 10 million Windows Mobile handsets in mid-2007. And for iPhone, Apple has to incorporate such a huge marketing effort hoping to achieve a similar volume target by sometime in 2008.
Now only HTC, one partner in the Open Handset Alliance, committed to ship Android based handsets in 2008. With its current capacity and potential expansion, HTC can probably ship 1 to 2 million of Android phones by end of 2008. This is assuming there is no porting and integration problem and Google has figured out all the distribution channels. Unless LG, Samsung and Motorola make some sizable commitments soon, Android will still be a very small player in the high-end market, even by 2010.
Why is that? The BOM cost of a smart phone is around $120 to $160 on average. Some really well equipped smart phones such as Apple iPhone may cost up to $200, according to street estimate. Comparing to software licensing cost, which is around $10 to $20, this industry is still a hardware and logistics play than software. If Android phones have to sell through distributors and carriers, the price will be at least $400 and hardly profitable. If Apple iPhone's price cut taught us anything, there is a price ceiling for a consumer-oriented handset. It also sets the limit on the premium that software can add. Of course, Google can always sell directly to consumer by opening its online store, Android Checkout. If that happens, it will speak loudly for Google's commitment to Android.
This is not a detraction to Android, but a reality check. If you are a developer and your focus is on Web 2.0 and the long tail, it may be worthwhile to consider Android. The Android platform may as well be the platform for Google's future consumer gadgets. In any case, it will be Google's commitment to Android that makes developer's effort worth. For the rest of us in the cell phone industry, there are too many things to improve and compete on. One more Android will not make the Borg cube collapse but more to assimilate.
