Apple Eyeing Mobile Music Handset Market

There is growing speculation that Apple Computer (Nasdaq: AAPL) may soon launch its own music handsets, though the company, as ever, remains mum on its forthcoming product announcements.

Apple is poised to launch its much-anticipated iPhone mobile phone in the spring, claims Telecom market research company Visiongain in a report issued over the weekend. The debut may come along with the launch of Helio, a U.S. mobile virtual network operator with which Apple has close ties.

Big Plans

"There exists a relationship between Apple and Helio management that goes back to the Rokr iTunes phone, and Helio has declared a target audience identical to iPod's existing market," Pam Duffey, a telecom analyst with Visiongain, told MacNewsWorld. "Helio's top executives have also publicly voiced frustration with mainstream carriers and appear to be on a crusade to radically shake up the industry."

Helio is a partnership between EarthLink and Korean telecom player SK Telecom, in which the two are estimated to have invested approximately US$440 million.

Helio plans to sign about three million customers and generate more than $2 billion in revenue by 2009, according to Visiongain. Helio will subsidize its handsets, Visiongain said, adding that its target demographic is both willing and able to pay for high-end phones.

"The iPhone will most likely be produced in South Korea by an existing handset maker and made available exclusively through Helio," Duffey said. "The iPhone will likely be as disruptive to the existing carrier market as the iPod was to the mobile music industry. When the iPhone adds VoIP capability, it will be even more disruptive to carriers."

Competitive Field

The study by Visiongain is not the only source of buzz about Apple's intentions.

Leveraging the success of its iPod music players, Apple has contacted a number of Taiwan handset makers -- including High Tech Computer, Inventec Appliances, Quanta Computer and Foxconn Electronics, which is the registered trade name of Hon Hai Precision Industry -- for possible cooperation in handset production, according to a report in a Taiwainese trade publication.

If Apple does indeed get into this market, don't look for the Cupertino, Calif.-based developer to have the market to itself for any considerable period of time. Sony Ericsson this week launched its Walkman handset, the W810i, in the Taiwanese market. The W810i, which offers a built-in 2-megapixel camera and music management software Disc2Phone, carrys a price tag of $538.

Sony Ericsson plans to launch an additional six to seven new handsets, including its J100, J220, J230, Z530, K610 and K800 models, in the second quarter in the Taiwan market, the company said.

Sony Ericsson is aiming to boost its share in the Taiwan market to 14 percent to 15 percent by the end of 2006, up from the 10.3 percent it reported in February.

Bits and Parts

Other vendors are also offering new music handsets, including Nokia's (NYSE: NOK) XpressMusic handsets and Motorola's (NYSE: MOT) iRadio lineup.

Who will make the chips for the new handsets? No one knows for sure, just yet. However, Intel (Nasdaq: INTC) has had a number of successful design wins in the handset market over the last year and is committed to helping its OEM (original equipment manufacturer) partners to promote and market its handsets, said Surendra Arora, director, customer solutions group. "We are exploring marketing collaboration opportunities with OEMs around the world," Arora said.

For the last five years, Intel has been trying to become a major player in mobile phones. However, only over the past 18 months has it begun to win contracts with major cellular makers.

Intel is reportedly in negotiations for incorporating the chips into future handsets from the world's top five makers -- Nokia, Motorola, Samsung, Siemens (NYSE: SI) and Sony Ericsson.

Mobile music will be hot on these phones, as 3G networks make downloading faster than ever, said Nick Lane, principal analyst at Informa Telecoms & Media. "As an industry, it's only natural to look to the next big thing -- but it is the consumers that we must consider at all times, as ultimately they determine what's successful," he said.