Will we see an explosion of new phone manufacturers?

Hampus Jakobsson, co-founder of The Astonishing Tribe, a member company of the Open Handset Alliance and partly responsible for the development of the Android platform, recently made an interesting statement (via Mobile Entertainment and techradar).

He says that the new platform will shake up the mobile market and that "There will be an explosion of new phone manufacturers".

Why should he say something like that? Aren't we actually looking at an industry with very few players, a de facto oligopoly with a trend to even more market concentration (e.g. Nokia's growth which is faster than the market's)?

New phone makers might be able to enter when current market barriers fall. Below is an analysis of those barriers.

Decomposing Market Barriers
In my opinion, the most important current barriers to entry for new handset manufacturers are: reaching wide distribution (and therefore economies of scale) by contracts with and subsidies from carriers, companies being able to offer a similar or superior user experience at a comparable price and last but not least hardware component manufacturing skills. What will lead to the reduction in market barriers? There are important changes shaking up the mobile ecosystem, one of them might well be Android.

1. Component manufacturing
Hampus rightly notes that building a phone is quite simple. It has become more and more commoditised over the years. To be honest: it's still a great engineering challenge to build a really good phone that can compare to those of the main players in this area. However it's possible and it becomes easier every day.

2. Offering a similar user experience
Actually, it's not about offering a similar user experience. Most handsets currently offer a lousy experience. You wouldn't really want to be there as a new manufacturer. This development would clearly be supported by a new and powerful operating system, offering full access to the mobile web and to the phone's components (GPS, Camera) and integral software parts (calendar, address book). Developers will flock to the greatest opportunities though - which at the moment seems to be the iPhone 3G and Apple's App Store (though Android's own App Store might just be around the corner).

3. Branding and acceptance
People are used to the limited number of handset manufacturers and the limited choice of brands. There are however opportunities for new manufacturers to enter. A huge number of buyers will check prices and compare phones on the internet before deciding to buy one. If you produced a handset and get great reviews on the main sites, there might be a considerable uptake. The only problem that I see is that in comparison to the incumbents you might not have contracts with carriers - and therefore your phone will be very expensive when compared to susidized phones.

4. Wide distribution
In my opinion, this is the critical point. How to reach wide distribution? The answer is obvious: by knowing your customer, building a great phone (hard- & software) that caters to his needs and finally also getting the business part right (where to sell it, how to compete with subsidized phones or maybe even scoring contracts with carriers yourself, how to survive the first months, ...).

Wrap-up
The barriers to entry for smart companies are falling and there might well evolve a new set of phone manufacturers who cater to specific needs and customise their handsets to relatively small user groups. Why not make use of this rich ecosystem and opportunity and try it yourself?