Java To Earn Wireless Operators $15.5bn

18th May , 2004

Europe : Despite the proliferation of Java handsets worldwide and the increasing number of vendor models containing the platform, the number of actual Java users is significantly lower. There are some very stark regional differences in this analysis, since in Japan and Korea it is believed that around 80% of all Java handsets sold in 2003 led to active Java users. In Europe on the other hand, the opposite is understood to be the case with a very low conversion rate of handsets sold to active users of only around 10%.

A new report from the ARC Group, MOBILE APPLICATION PLATFORMS AND OPERATING SYSTEMS 2003-2008, estimates
the Java market to have earned operators almost $1.4bn in 2003, which is forecast to dramatically increase to over $15.5bn by 2008. This equates to around 3% of all data revenues in 2003, rising to 12.4% by 2008. Removing person-to-person messaging revenues as an application category from both the total and Java markets is estimated to leave Java with a 10.7% share of total
revenues in the remaining categories in 2003, increasing to 27.4% by 2008 - a fair return for Java applications in the contents categories.

MOBILE APPLICATION PLATFORMS AND OPERATING SYSTEMS further finds the Java market to be dominated by the entertainment sector, and in particular gaming, which will see traffic rising from 4.3bn events in 2003 to just over 50bn by 2008.

In 2003, it is estimated that entertainment formed 76% of total Java application volumes, but this will fall to around 40% by 2008 due to increased usage of Java based messaging platforms. As one would expect, games provided the most usage in the sector, with volumes of 3.6bn in 2003 or 85% of the Java entertainment sector - a level that is expected to be maintained for the next five years - and two-thirds of all Java applications.

One of the advantages of Java technology is its openness, which has attracted more than 500 companies to contribute to different Expert Groups. However, this advantage is unfortunately being depleted.To date more than 260 Java specifications requests have been initiated by the leading players who generally aim first and foremost to benefit their own technologies rather than help the Java industry improve as a whole. This has made Java one of the most fragmented technologies in the history of the data industry. As a result, tool vendors cannot easily take advantage of standard APIs when building functionality into their tools and often create proprietary techniques to achieve the benefits that the standards were originally created to address. Application portability is currently one of wireless Java's greatest weaknesses.

"It seems that Java is currently undergoing the same experience as WAP in its early deployment. WAP promised consumers a flawless mobile web-surfing experience and advanced wireless data services. Unfortunately this did not materialise because the
content was not compelling enough to attract users in sufficient volumes" says Malik Saadi, senior analyst and researcher at the ARC Group and author of MOBILE APPLICATION PLATFORMS AND OPERATING SYSTEMS. "The Java community has much to learn from the WAP experience and should strive to ease the development path for applications developers, a condition that is vital if this technology is to succeed. Without such efforts, the
fragmentation of the Java market, the problems of applications portability, together with the poor performance of Java applications compared with native applications, and the lack of support for applications other than games could all limit the use of Java in the future."

In addition, the wireless Java industry is currently facing tough competition from within, as well as from other technologies such as BREW and advanced OSs. In order to remain competitive and win market share, players throughout the supply chain will have to maintain attractive pricing whilst also differentiating their products. They will thus need to reduce their margins if they want to remain competitive. Leading device vendors and wireless network suppliers are still using proprietary technologies and will not outsource alternatives unless they can save money and reduce time to market. This has led to strong pressure on pricing, challenging competitors and pushing them to either align themselves or lose share if they want to maintain margins.

In 2003, the number of devices featuring applications platforms in conjunction with an OS, including Java and BREW, or GVM reached 115m units, most of them being mid-range to high-end devices. The concept of featuring these platforms over proprietary OSs will continue to prevail in mid-range handsets and will progressively penetrate the lower-end. However in the high-end of the market, including smartphones, there is tough competition between feature rich open OSs and such platforms embedded over proprietary OSs. The total number of devices shipping with one or more of these platforms on the top of proprietary OSs will reach 627m units in 2008 from 102m units shipped in 2003.

Handsets equipped with Java rose threefold in 2003, reaching sales of 95.5m in 2003 from 32m in 2002. Java is already well entrenched in the handset market worldwide with current key markets being Korea and Japan. The South Korean market is dominated by Java-enabled CDMA phones and in Japan over 50% of handsets in circulation are already Java-enabled.

MOBILE APPLICATION PLATFORMS AND OPERATING SYSTEMS finds that North America and Europe will see greater levels of Java penetration by 2004. However, it is anticipated that widespread penetration will occur towards the of 2008. Java is also now starting to make inroads into China, with China Unicom stating that its UniJa Java service will be one of its main development focuses in value-added services for 2004.

While Java technology is evenly spread over all the wireless networks, including GSM, CDMA, and PDC, BREW has been embedded in CDMA devices only, owing to the leadership of Qualcomm in the CDMA chipset and network markets. Shipments of BREW devices reached 11.6m in 2003 up from just 3.5m units in 2002 and are expected to exceed 75m by 2008. BREW is noticeably absent from any GSM carriers' portfolio. Nevertheless, Qualcomm is confident that BREW will make its way into the European market through its WCDMA (UMTS) chipset, which is receiving some
positive interest from European carriers.

The Asia Pacific region, mainly South Korea, China, and Japan - remains the main market for BREW with a market share of 51% in 2003 against 47% for North American Market and 2% for South America. BREW was absent from both Europe and Africa since these regions mainly use the GSM network, which strongly endorses Java.

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