Semiconductor : Chipping Away at the Divide

Almost half of the new subscribers for several cellular service providers
came from the rural segment in the last financial year. The operators' ability
to bring down the entry barriers for masses made this crucial difference. The
mobile umbrella is fast opening wider, covering more and more rural geographies,
which is slowly growing as demanding as the mainstream urban market. The
manufacturers endeavors are focused to get multimedia applications on low-cost
chips to the handset.

India's telecommunication sector is witnessing an unprecedented growth with
falling tariffs and rising incomes, which is bringing mobile phones withinreach
of the millions of new customers every month. Mobile industry players are eyeing
rural India as their new area of opportunity. The RNCOS report on "Emerging
Rural Mobile Market in India" notes that the Indian mobile market will be driven
by an increased focus on the rural market, aggressive promotions, and handset
bundle offers. As per the findings of the study, mobile subscribers in rural
India accounted for just 20% of the Indian mobile subscriber base. However, it
is forecast to grow at a CAGR of more than 47% during 2007 to 2010.

The major growth in mobile phone subscribers will be seen in C and B circles
in the short-term. Enormous opportunities are emerging for the low-cost handset
manufacturers along with low tariffs, infrastructure development for mobile
communication. Rural India will account for around 35-38% of the total mobile
handset sales by 2010.The low population density in rural areas has given rise
to the need for more towers of higher altitudes, raising the costs further.
Language is one of the major problems as there are many dialects. Besides these,
the biggest challenge is to control the cost. The success lies in developing
handsets customized to rural needs, but at a controlled price. Low-cost chips
can prove to be a blessing for the rural market.

Expansion Efforts

It is a must to have a thorough know ledge of any market that the players
aspire to conquer. They must be able to identify the needs of the consumer.
There should be ground level surveys in rural India with routine and active
interactions with rural district administrations and rural work groups, to
observe and decode the role played by mobile phones in people's lives. Key
assumptions should be validated with respect to design and usability.

Aravind Pai, director, sales and marketing, ST-NXP Wireless India says his
company depends on user interface and partner networks to perform field trials
to test and validate the products in rural markets. Sasken's general manager,
strategy, Raja Setlur agrees. He refers to one of the observations made by his
team. "The digits of the handset of a typical rural folk are bigger than typical
urban folk. A phone with the usual size of keypad will not work from a usability
standpoint. This then strengthens the trend we are seeing for voice-based
services and resurgence of IVR, voice XML systems as part of operators' service
delivery platform," he says.

"If the handset manufacturer wants to make his handset friendly for such user
groups-an enhanced size of keys or hot keys for specific services or touch
screen method of input become vital for consideration," he adds. The rural
demands are changing, so is the approach of the manufacturers, who intend to tap
the potential of this market.

Qualcomm, which sees cost as a key factor for the rural segment, says it is
enabling its OEM partners to offer affordable and feature-rich devices to Indian
consumers. Especially for the rural segment, mobile handsets need to be
affordable, feature rich and power efficient. Qualcomm has a single chip (QSCTM)
platform that has brought music, camera, browsing and Internet access
capabilities to entry-level handsets. Huawei 2900i has been designed on Qualcomm
(QSC 6020) priced at Rs 2,000. It enables Internet browsing in Indian local
languages like Hindi, Tamil, etc.

Once camera becomes popular, the need for video on handsets for the rural segment will also increase Jithu Niruthambath, director, wireless business development, Texas Instruments	Handset manufacturers have to now offer solutions like color screen, FM, camera, music and browser capabilities in entry-level handsets too. A mobile handset is the true entertainment partner of the rural consumer today Dinesh Prasad, director, sales and business development, Qualcomm India

The company, along with MS Swaminathan Research Foundation (MSSRF), Tata
Teleservices and Astute, has created specific solutions for the farmers and
fisherman community. "Our fisher friend initiative brings vital information to
the fishing community regarding weather conditions, potential fishing zones and
market information to fisherman on their mobile handsets in their local
language," say Dinesh Prasad, director, sales and business development, Qualcomm
India.

Jithu Niruthambath, director, wireless business development, Texas
Instruments India says, "Considering that rural India needs devices to keep them
connected as a community, we are laying a lot of emphasis on providing solutions
that allow them to get information, support m-health, m-education and
m-governance. We are working with OEMs/Design Houses to enable affordable mobile
Internet devices to support these services."

Rural Designs

The rural buyer is gradually becoming choosy about the applications but
still remains very conscious of the price. If more applications can come for
lower prices there can be nothing better. The rural segment wants value for
money, as for most of them a handset is still a luxury. Interestingly, with
exposure to more options, the profile of the rural consumer is undergoing a
gradual change. Rural consumers want to buy good quality handsets at affordable
price. They do not want "low-end handsets" any more.

"With current penetration in India at approximately 27%, expected to go to
45% in the next two years, consumers in India are looking for quality affordable
handsets with a wow factor," says Pai of ST-NXP Wireless. The shape, size,
thickness, color, and finish matter a lot. A consumer's definition of value for
money differs in each consumer segment but is always important. Of ultimate
importance is the performance of the phone vis-à-vis RF sensitivity, talk time,
voice clarity, and ease of use.

"Indian consumers, even in the rural areas, are getting savvy and they are
demanding features beyond voice-SMS at all tiers including entry level. The
important considerations for entry-level handsets from our perspective is
affordability, in-demand features and power efficiency," Prasad of Qualcomm
says.

Since value-for-money has different definitions for different consumers,
Setlur of Sasken believes it is important to first clear ambiguity surrounding
the term 'low-end' handset. Should this imply low cost, low device capability,
low levels of mobile usage know-how in certain markets and therefore a handset
that serves their needs, or the lower economic segment of the country? He
observes that there is some difference in all the possible implications and each
one should be dealt with separately.

"Price does emerge as the single most important factor in the segment that we
are talking of and has a huge bearing on adoption. Consumer trust patterns in
this part of society tend to play a significant role. For instance, should a
shared phone be different from a non-shared phone? A person using a hitherto
shared phone may suddenly stop using it once financial services are started.
Will he or she part with personal financial data?" Setlur says, adding that
vernacular or linguistic support does help last mile penetration in rural India
and therefore that becomes an important design consideration.

On the Platter

Rural India has been drawing attention from all players-manufacturers and
operators. Manufacturers are focusing on rural needs. The companies are striving
hard to strike a balance to develop a diverse portfolio. They are delivering
chips and software for handsets from entry level to mid-end that meet
requirements of the already explored and the new markets.

Sasken claims its application framework (SAF) can bring rich media
capabilities to the so-called "low-end" phones. It enables phones in various
defined price points and accommodate features-camera, color display, livelihood
applications, multi-touch display, proxy/full browser, etc. Some exploratory
areas are around mobile security and trust-based architectures to ensure secure
and safe transactions.

The PNX4900 is a GSM-only chip for voice+SMS phones, PNX4901 is a chip for
GSM/GPRS phone with hardware Java accelerator, Mono Mp3 player and FM radio
support. The PNX 4903 is a chip for GSM/GPRS phone with stereo Mp3 player, FM &
T flash support The PNX4902 is a chip for GSM/GPRS phones with WAP/MMS,
Bluetooth, camera, USB as well as touch-screen support. The PNX4906 supports
Bluetooth stereo A2DP profile along with Mp3 stereo.

"All these chips come with best-in class RF sensitivity and the lowest power
consumption in the industry. A color voice/SMS phone can be build with less than
100 components. All these chips are made with lead-free packaging, along with
built-in 128-bit RSA security, which can help in developing theft-proof phones.
These chipsets support more polyphonic ringtones/Mp3 ringtones and louder
ringtones, as well as speaker-phone designs. We also support our customers with
a mature telecom stack which has been tested in the field in India," says Ton
Van Kampen, vice president, business development, ST-NXP Wireless.

In the case of affordable handsets, Texas Instruments offers LOCOSTO and
ECOSTO solutions to support all the requirements. Texas Instruments' solutions
enable designing and manufacturing of affordable handsets (not necessarily cheap
ones) with rich feature sets. The LOCOSTO family supports basic GSM phones to
GPRS phones with QVGA screen, audio and video players up to 1.3 megapixel
camera. The ECOSTO family supports EDGE functionality with up to 3 megapixel
camera.

For mobile Internet devices (MIDs) Texas Instrument's OMAP provides the right
platform. The most important feature of these devices is high performance
computing with long battery life. TI's OMAP 3 platform supports: laptop-like
performance at handheld power levels in a single chip.

The new integrated superscalar 600 Mhz Cortex-A8 gives four times the
performance compared to the current 300 Mhz ARM9 devices. A variety of Cortex-A8
core combinations are available in the new OMAP35x

Trendy is In

It is a myth that rural consumers are looking only for cheap handsets.
Observations by OEMs show that rural customers consider mobile phones as a
valued possession to show off. They are demanding more multimedia-enabled
handsets now. India's entry-level device segment has evolved significantly over
the years. Form factors, features, capabilities and even access to content are
very critical for these price sensitive users in rural India. Some new rural
trends have been identified in the area of mobile banking.

"We clearly see two key trends in the segment: there is a movement toward
lower-cost handsets, which enable more and more rural first-time users to buy
phones. These handsets are generally bundled with services from the operator.
These markets need very reliable, rugged phones that satisfy user preferences as
well as lower the cost of acquisition for operators. We're seeing color and FM
phones becoming the default in this segment," Pai says. "The other trend is in
the replacement market, where users want more features for the same price or
feature-rich handsets. These features include FM radio, Mp3, larger displays,
USB charging, and content customization," he adds.

The availability of spare parts, like battery and charger, and faster
servicing of products is also becoming increasingly important in rural markets.
As a result, there is a trend toward standardization of interfaces for charging
and connectivity, to simplify the servicing. Qualcomm's Dinesh Prasad views that
handset manufacturers have to now offer solutions like color screen, FM, camera,
music and browser capabilities in entry-level handsets too. A mobile handset is
the true entertainment partner of the rural consumer today, given that other
entertainment options are a constraint due to power deficiency in most parts of
rural India. "We are working with its wireless ecosystem partners toward making
the 3G experience mainstream. Qualcomm believes that 3G will trigger wireless
broadband growth in India, which is critical in bridging the digital divide,"
says Prasad.

Niruthambath of Texas Instruments holds that for the entry-level segments,
radio, music players, color screens, etc, are becoming important requirements.
In the areas where FM radio service is available, FM support has become a must.
There are also phones coming out with AM radio to target radio service across
the country. Similarly there is a trend to support good camera functionality in
the handsets. "Once camera becomes popular, the need for video on handsets for
the rural segment will also increase," he predicts.

Heena Jhingan

heenaj@cybermedia.co.in