Software is the key in smartphone fight

Second-tier vendors such as Samsung Electronics, Motorola and HTC may be worst hit as they could go the way of their bigger cousin, the PC, with little to distinguish one brand over another.
These players have to choose between the high cost of developing their own systems, or selling phones that look and behave the same as any other on the market.

Developing their own platform allows brands to offer applications such as social networking sites and software unique to the phone, helping them attract users.
“It's really a must-do for all smartphones brands at this point,” said Andrew Chang, an analyst at the Daiwa Institute of Research. “If you don't have your own interface, your phone is going to be relegated to the cheap corner where everything looks the same with low brand recognition and very thin margins.”
Many of the low-tier brands are likely to turn to Google’s Android operating system as this will allow them to benefit from the search giant’s brand name and take advantage of the myriad of applications already available.

HTC is the only phone maker that has launched its phones running on Android, on top of other phones it already has that run on Microsoft's Windows Mobile.
Android’s open-source nature, meaning developers can customise the software to meet their own needs, is set to attract more brands, as it allows them to design their own system without having to do so from scratch.
“Android is really the way to go for the smaller smartphone brands,” said Richard Ko, an analyst at Jih Sun Securities, who said any brand with less than 10 percent of the market should not try designing their own software. “There's the software support that Google can provide, and it already has some form of an ecosystem around it.”  Some brands are already turning to Google.

After losing market share for years, Motorola has made what is viewed as a make-or-break bet on Google’s mobile software, hoping the partnership with the giant Web company can help it win back customers.
About half of all smartphones run on Nokia’s Symbian operating system, with Research in Motion and Windows Mobile coming in at second and third place, respectively.  The one-year-old Android system remains a relatively small player in the field right now, with most analysts putting its share of the market at less than 1 percent.

Smaller players worst hit
Nokia, Research in Motion and Apple dominate the smartphone market, with about 70 percent of all users using one of those three brands, with others including HTC and LG Electronics holding a market share of less than 5 percent each.
Besides development costs, second-tier smartphone companies face the further challenge of convincing third-party software developers to design applications to run on their platform, to ensure their system does not exist in isolation.
These development costs are likely to whittle away at the fat profit margins smartphones provide, with gross margins at 20 percent or more for the higher-end models but in the low teens for cheaper mass-market cellphones.
Most analysts have also been dismissive of any attempt by software makers and cellphone brands to create their own brands, pointing to the technical difficulties and competition.

“It’s not just developing your own system, it’s about getting others to support your system,” said Anshul Gupta, an analyst at data tracking firm Gartner. “Users are also looking for applications such as Facebook, and that’s a factor that is going to push the edge for many users.”
Apple's App Store already has tens of thousands of applications available for users of its iPhone to download, while rivals Research in Motion and Nokia both have thousands in their respective online stores.