Vendors of cellular M2M (machine-to-machine) radio modules face a long-term threat to their very survival. Even in the short-term, they are under increasing pressure in maintaining their profitability. Paradoxically however, several factors that inhibit the M2M market as a whole do in fact provide these vendors with a measure of temporary protection, and they do have several defensive countermeasures.
“M2M module vendors are in a precarious position,” says ABI Research senior analyst Sam Lucero. “If their OEM customers bypass them to work directly with providers of cellular baseband ICs, who supply reference designs and related support, separate modules are no longer required and their reason for existing disappears.” ABI Research has observed this process beginning in OEM consumer telematics. Many application developers see M2M modules as commodities; Asia-Pacific module vendors drive prices down, and Qualcomm and NXP are already in the market directly providing reference designs.
However, the M2M market faces several conditions which inhibit growth generally but actually provide some level of protection to module vendors. This market is highly fragmented, and characterized by complex applications. Moreover, most OEMs lack the radio design expertise required to “go it alone.” For the M2M market as a whole, those factors limit volumes and growth. But for module vendors they afford some measure of protection: it’s more economical for an application developer to purchase off-the-shelf modules than it is to hire radio design expertise, source chips directly, and undergo certification alone.
“The module vendors are well aware of the disintermediation threat they face, and they have several responses,” says Lucero. “One is differentiation with software and services. A second is to become a more perfect ‘business wrapper’: that is, to perfect their R&D, pre-certification work, and assume a lot of the application developers’ burden. Telit, for example, ensures “future-proofed” support for specific form factors. Finally, extreme operational efficiency. SIMCom Wireless Solutions and others aim to make their operations so efficient that they can compete effectively on price.
A new ABI Research study, “Cellular M2M Markets” discusses these market forces, analyzes cellular M2M module vendor strategic responses, provides 2006/2007 vendor market share data, and forecasts cellular M2M module growth from 2008 through 2013. It forms part of three ABI Research Services: M2M, Consumer Mobility, and Mobile Devices.
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