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Monthly Archives: March 2012

Sharp-er Hon Hai / Foxconn

imageUpdate: IGZO: Vision for the Future [a special advertising section by sharpusa.com in The Wall Street Journal, Jan 7, 2013] which was timed for the CES 2013 opening and was used as a detailed landing site for banners put everywhere like here with view (Jan 20):

Powering the resolution revolution

Liquid crystal display (LCD) performance is about to take another leap forward. Existing LCDs have given us remarkable quality in HDTV, tablets and smartphones, as well as reasonably low power consumption. But Sharp Corporation is on the verge of delivering a new technology that will enable much higher resolution and significantly lower power consumption. More

The science behind the breakthrough technology

The hunger for display resolution will probably never be satisfied until displays are indistinguishable from a printed page and as nuanced as a watercolor. IGZO takes a large step in that direction by enabling very high pixel-per-inch counts on small displays and Ultra-High Definition on larger monitors, while retaining brightness. More

Inventing the future

The great thing about a technological breakthrough like IGZO is that it makes dreams come true. Yesterday’s dreams, today’s dreams, tomorrow’s dreams. More

Update: Capital Alliance with Qualcomm, Inc. and Display Technology Development Agreement with its Subsidiary Pixtronix, Inc. [Sharp press release, Dec 4, 2012]

Sharp Corporation (hereafter “Sharp”) today announced that the Company has reached an agreement with Pixtronix Inc. (hereafter Pixtronix), a subsidiary of Qualcomm Incorporated (hereafter “Qualcomm”, NASDAQ: QCOM), concerning the development of Pixtronix’s MEMS*1 displays. In addition, Sharp signed the capital alliance agreement and will issue new shares by a third party allotment (hereafter “This Third Party Allotment”) with Qualcomm Incorporated, a world leader in 3G, 4G and next-generation wireless technologies, as the allottee.

MEMS display to be developed jointly by the two companies is a display using ultrafine process technology and existing display manufacturing infrastructure with features including high color reproducibility and low-power consumption. The development for commercialization of MEMS display will be achieved by integrating Sharp’s core display technology, IGZO*2 and MEMS display technology of Pixtronix.

In addition, Sharp is planning to accept up to 9.9 billion yen*3 from Qualcomm in equity investment to pursue this joint development. This capital will be used for the development of MEMS display and necessary capital investments related thereto targeting for the achievement of the technology for commercialization.

With this agreement, the two companies will consider the possibility of further collaboration of chipsets by Qualcomm Technologies, Inc., a wholly-owned subsidiary of Qualcomm Incorporated and IGZO-based display technology for lower power consumption and higher performance of mobile terminals.

With this agreement, Sharp will accelerate its strategy for growth in small- to medium- sized LCD business with IGZO-based display technology as its core, and expand its revenue and corporate value.

*1  MEMS: Micro Electro Mechanical Systems

*2  IGZO: IGZO (InGaZnO) is an oxide comprising indium (In), gallium (Ga), and zinc (Zn). A thin-film transistor using this material has been developed by Sharp in collaboration with Semiconductor Energy Laboratory Co., Ltd. (a company based in Kanagawa, Japan, and led by President Shunpei Yamazaki)

*3  Equivalent to 120 million U.S. dollars calculated by exchange rate of December 3, 2012

Summary of the joint development and capital alliance

1. Development for the Commercialization of Next Generation Display

  • The next generation display will be jointly developed integrating Sharp’s IGZO-based display technology and Pixtronix’s MEMS display technology. The joint development will establish facilities in the LCD panel plant in Sharp Yonago Corporation (location: Yonago city, Tottori prefecture, Japan) for development of the technology for commercialization.
  • The development for next generation displays and necessary investment will begin immediately. At the point when the development of the technology for commercialization is confirmed to be feasible, we will move to the next stage by implementation of equipment targeting to achieve mass production technology.

2. This Third Party Allotment
Sharp will issue new shares by third party allotment with Qualcomm as the allottee by each stage of joint development of the technology for commercialization. The second stage is contingent upon achieving certain milestones.

<Notice Regarding the Execution of Capital/Business Alliance Agreement with Qualcomm (US Company) for the Joint Development of Next Generation MEMS Display and the Issue of New Shares by Third Party Allotment (PDF:83KB)>
http://sharp-world.com/corporate/ir/topics/pdf/121204.pdf

Update: Foxconn aims to land iTV orders by investing in Sharp, says CMI former executive [DIGITIMES, June 29, 2012]

Foxconn Electronics’ investment in Sharp is aimed at securing iTV orders from Apple, which will be a positive development for the flat panel industry if the strategy works, according to Ho Chao-yang, former president of Chimei Innolux (CMI) [also controlled by Foxconn] and current chairman of Chi Mei Materials Technology.

It is a win-win strategy for Foxconn and Sharp, and the tie-up is believed to be able to create new markets, Ho stated.

In addition to benefiting the flat panel industry, the launch of iTVs will also benefit polarizer makers, including Chi Mei Materials, Ho added.

Chi Mei Materials posted net profits of NT$1.43 billion (US$47.73 million) or an EPS of NT$3.37 in 2011.

Foxconn [Hon Hai] `Gamble’ on Sharp an Apple TV Bet [Bloomberg YouTube channel, March 28, 2012]

March 28 (Bloomberg) — Pelham Smithers, managing director of Pelham Smithers Associates, discusses Foxconn Technology Group’s 133 billion yen ($1.6 billion) investment in Sharp Corp. He speaks with Mark Barton on Bloomberg Television’s “Countdown.” (Source: Bloomberg).
[0:07] Q: WHY WOULD YOU WANT TO BUY A COMPANY WHO LAST MONTH FORECASTED A RECORD 290 BILLION YEN LOSS FOR THE FISCAL YEAR? NOT THE COMPANY BUT A 9.9% STAKE. A: Because there is one lovely gem in that business, which is the 10G LCD manufacturing plant in Sakai. This is the only one of its type. It’s probably going to be the only one of its type. It is the most efficient plant at making 60-inch TV screens and as such, it could be the future of smart television.
Q: AND THE FUTURE OF SMART TELEVISION MIGHT BE THIS ADVANCED SCREEN TECHNOLOGY CALLED IGZO. … A: IGZO is a transparent semiconductor device. So what this means is that one day you could be looked in window, switch on a button and suddenly turn it into a television because all the transistors are transparent. And that is seen as the future of television for variety of different reasons. It is very efficient, electricity passes very quickly through, so there is no loss of power, it’s very thin, very flexible, and it leads very nicely from LCD into AMOLED. [1:26]
… [1:41] I think they [i.e. Sharp] have sold a lot of their future to survive today. This is a very, very good deal for Foxconn because it gets them firmly into the TV side of the Apple pipeline. [1:53]
… [2:03] It is a gambling in that regard. But if anybody knows what Apple is going to be up to in the future, it’s Hon Hai, who makes or fabricates lots of Apple products. So they’ve come in and they’ve made this decision that if it’s not Apple than it is probably somebody else. [2:20] …

Updates: Hon Hai Estimated to Ship Some 10 Million LCD TVs This Year [CENS, May 8, 2012]

[The Shanghai office of the] Market research firm DisplaySearch [in preparation to the 2012 China Smart TV and Smart Display Conference] estimated Hon Hai Precision Industry Co., Ltd., currently the world’s No.1 contract electronics manufacturer, to ship close to 10 million LCD TVs this year thanks to hefty contracts from Sony and Sharp.

Sony has contracted Hon Hai to supply eight million TVs while Sharp has designated the contract supplier to ship 1.5 million TVs this year. Hon Hai has acquired many of Sony’s overseas factories and bought into Sharp in order to secure steady contracts with the two brand name suppliers.

People say Hon Hai is likely to acquire Sharp’s TV factories in mainland China, Indonesia and Mexico to expand its contract TV manufacturing capacity.

Sharp plans to deliver 12-13 million TVs this year while Sony projects to ship 19 million TVs. Both companies will ramp up outsourcing.

As Hon Hai is the primary recipient of the contracts, other contract suppliers like Wistron Corp. are estimated to receive reduced number of contracts from the two companies. Wistron is projected to ship 4.8 million TVs this year, around half the number it shipped last year.

Hon Hai is posing a challenge to the world’s No.1 contract supplier TPV Technology Corp. with the bright shipment estimate. TPV shipped 13-14 million LCD TVs last year to big-name suppliers including Philips, Sony, Vizio, Best Buy, TCL and Skyworth. Its 2012 shipment is projected at 15 million systems.

Compal Electronics Inc. has put its 2012 shipments of LCD TVs at eight million systems mostly thanks to contracts from Toshiba, which will increase outsourcing to 70% of its output this year.

Samsung also revises strategy to begin outsourcing the TVs, planning to depend on contract suppliers for around 30% of its total output this year. This year alone, the company aims to ship 45 million LCD TVs.

Special analysis: Hon Hai into sharp and subsequent effects [DisplaySearch Shanghai office press release, May 3, 2012] as traslated by Bing (or the alternative translation by Google)

NPD DisplaySearch Shanghai Office, May 3, 2012-the flat panel display industry as a whole in the near future the most shocking news is Hon Hai into sharp’s investment. Be held in Shenzhen on May 24- DisplaySearch 2012 smart TVs in China Summit Forum [see the English version of 2012 China Smart TV and Smart Display Conference]will provide an in-depth analysis of industry news and discussion between participants and Panel and an oversized TV Panel development trends. For more details, please refer to the official Web page of the Conference www.DisplaySearch.com.CN.

On March 27, 2012, Hon Hai and sharp have announced the following two types of investment decisions.

  • Hon Hai gets sharp will invest 800 million dollars approximately 11% shares, Hon Hai also became sharp’s largest shareholders, this will ensure that the Hon Hai can be directly involved in operation sharp liquid crystal display sector and related technology research and development projects.
  • Hon Hai gets sharp to invest about 800 million dollars in Japan, Sakai 46.5% stake in ten lines, thus ensuring that Hon Hai can has about half of the ten generations line capacity and ownership of the output panel products.

After the investment of the sharp, Hon Hai in the two panel manufacturers in the possession stakes: Chimei 12% equity 10% equity and sharp. Our blog posts in March 27, 2012 (DisplaySearch Blog) , “Hon Hai investments Sharpe-10 line joined the competition with Samsung and LG” (Hon Hai Invests in Sharp’s Gen 10 – Joining to Compete with Samsung and LG) have discussed the background and impact of this massive investment, further analysis of this article will be on the …

Hon Hai and before its investment stake among panel makers Chi Mei, has established in the past a number of strategic alliances with the sharp, specific terms are the following several points:

  • Hon Hai was sharp LCD module Assembly contract manufacturer.
  • Sharp UV2A photo distribution to it by technology licensing technology licensed to Chi Mei, sharp has helped us improve and odd in Taiwan 7 ‘s and 8 ‘s line of light distribution to the production process of climbing.
  • Sharp LCD TV OEM business orders it to the company.
  • Chi Mei started to supply some not for the production of the sharp LCD sharp LCD TV.This sharp 8 generations it wire into metal oxides (Oxide TFT) production process and the capacity utilization rate of 10 lines to reduce gradually increased.
  • Hon Hai is a major machine-Assembly of the Apple iPhone and iPad. At the same time, sharp is a major Panel suppliers for iPhone and iPad. Both have worked closely together to address the production of Apple mobile phones and tablet computers and technology issues.
  • Hon Hai is also a main unit of the Sony LCD TV Assembly; at the same time Sony purchased from a sharp LCD TV panels, mainly sharp 10-generation production line of 40-inch and 60-inch Panel and Panel provides to its television assembly plant for Assembly. In other words, sharp and Hon Hai on Sony LCD TV products to cooperate on the project with indirect relationship.

Taking into account these relationships, you can guess Hon Hai and sharp through both direct and indirect cooperation for a long time on the other side there is a certain understanding. This fusion of the two companies ‘ corporate culture would be very helpful.

Hon Hai into sharp and influence

Once the company into sharp, lots of new status will appear. Direct effect is Hon Hai will obtain sharp 10 lines of a large production capacity, as well as many leading LCD Panel sharp technology. With such huge sums of money into, Sharpe must also be able to improve its financial position and balance of expense reports. According to our analysis, there will be the following:

50% 1, Hon Hai will obtain sharp 10 lines of capacity control

LCD TV market in the current situation, sharp 10 line capacity utilization has been poor.Its total capacity is 10 lines 72K mother glass into a month, but Sharpe has been unable to get enough orders to meet the maximum capacity, capacity utilization is not high.Sharp 10 lines are now mainly produce 40-inch, 60 and 70 inch panel products, but in the first quarter of this year, only input 42k of glass per month. And sharp originally planned in two or three quarters of this year reduced input to 35~36k per month with a minimum of cost. After the arrival of Hon Hai will be by looking for more orders to meet the remaining close to half of the capacity requirements. At the same time, 40-inch, 60 and 70 inch does not singularly American TV panel production within product list, so relatively speaking on the impact of the Chi Mei is also relatively small.

Table a, sharp 10-generation size glass line inputs (in thousands of pieces/month)

Data source: Quarterly Large-Area Production Strategy Report , Q2’12-Q4’12 to forecast values

Table II, sharp glass 10 lines into the size ratio

Data source: Quarterly Large-Area Production Strategy Report, Q2’12-Q4’12 to forecast values

2, the company will expand sharp’s LCD TV manufacturing

Company plans produce 9.5 million in 2012 LCD TV sets, including 1.5 million of the 8 million units of Sony and sharp. Hon Hai was a few years ago Sony and Sony’s LCD TV assembly line production. With sharp Panel capacity and technology, Hon Hai will expand its OEM business. Sharp LCD 2012 TV shipments expected to reach 1,200 to 13 million units, in other words 1.5 million accounted for 12.5% of the Hon Hai worker, compared to the last quarter of 2011 only 3.2% sharp LCD TV is Hon Hai worker, has a good growth. If Hon Hai is sharp more OEM orders, TPV and other contract manufacturer Wistron orders will be directly affected.

Table three, sharp LCD TV manufacturer and percentage list (Q4’11)

Data source: Quarterly LCD TV Value Chain Report

3, Hon Hai will contact sharp many industry-leading Panel technology

Not only large-size LCD Panel technology, Hon Hai will also get sharp’s small and medium size panel technology and mobile devices. As sharp’s largest shareholder, Hon Hai will be greater use of sharp’s reserves of power engineering technology to strengthen its display technology. These technologies include LTPS (low temperature poly silicon, sharp called the CGS), oxide TFT,UV2A,RGBY the four panels of the color spectrum, and a number of other important related technologies. Hon Hai’s need to leverage these technologies to assist them in deep in China Shenzhen Super 5 line shifts from amorphous silicon to LTPS process and Hon Hai in Chengdu city LTPS 6 generations of the construction of a new line-Tianyi display 6 generations line of science and technology, these technologies will help a lot. Rumor has Apple will launch a new display technology used in LCD TV products, Hon Hai can also use a sharp order to win Apple’s advanced technology projects. Even more interesting is that shown in the following figure, Sharpe is also a major patent holders of the naked-eye 3D technologies, which would also become a major advantage of Hon Hai.

Figure, naked-eye 3D technology patent ownership

Data source: Synergytek Consultancy

4, Hon Hai will be on material procurement of parts and components to help sharp

Hon Hai to components suppliers, strong negotiating abilities known to the industry. In his intervention after sharp 10-line operation, Hon Hai is its powerful procurement negotiation skills can also be used to assist the sharp reduction of parts procurement costs.

5, the Chi Mei will benefit from Hon Hai and sharp’s new relationship

Chi Mei was originally through the payment of licensing fees, Forms Panel gets sharp UV2A technology production and supply to the sharp. After this investment, the company also owns shares of the two companies and 12%, Hon Hai will have the opportunity to coordinate between the two companies, greater support of Chi Mei to get sharp, even you can reduce licensing costs and sharp agreement to pay.

6 Panel, sharp will be able to get more customers

Sharpe has been dominated by self production, its LCD TV panels from the main internal supply. In the past, sharp had planned to rely on its strong customer base high-generation panel production capacity expansion, but sharp panel facing a Terminal product under the brand over competitors ‘ challenges. Currently main supply Panel for sharp TV sharp, Philips, Samsung, Sony, TPV and (as described in the following table), Hon Hai after intervention, Hon Hai helps Sharpe to find more customers. However, because there is a competitive relationship between, Hon Hai allows sharp continues to supply to Samsung and TPV would face uncertainty. In addition, Philips and TPV TPVision has a joint venture, and TPV compete on many OEM business with Hon Hai, so delicate.

Table four, first quarter of 2011 sharp LCD TV Panel’s main customers

Data source : Quarterly LCD TV Value Chain Report

Hon Hai and sharp the next possible courses of action

Analysis and judgment based on NPD DisplaySearch, we believe that the Hon Hai will then take the following action:

  • Hon Hai could get further sharp located in China, Indonesia and Mexico’s TV manufacturing plant. After getting these manufacturing plants, Hon Hai will also further consolidate its important position in the Sharpe television manufacturing business.
  • North America’s leading brand of LCD TV Vizio may balance Hon Hai and sharp’s resources in an attempt to form a new supply chain, and this will also help to Vizio in markets such as China and Europe have more choices. Vizio LCD TV OEM customers currently Hon Hai. This investment Vizio can seek more flexible company and Sharpe’s contract manufacturing and supply Panel. Sharp 60 inch to 70 inch Vizio to enrich their product lines are also useful.
  • Hai dedicated business team formed to sharp 10-line business and plant operations.Sharpe 10 lines for the business group supply and capacity allocation, customer choice, Panel pricing and so on all have the right to decide; 10 lines of course they also need to be responsible for the sales and financial performance. Therefore, Hon Hai for sharp TV’s growth in the global market will have a significant impact. Hon Hai was also needed on the productivity of 10 lines to maintain a higher capacity utilization and rational distribution planning is responsible for.
  • The company want to optimize the productivity of 10 lines, and clearly is the best cut of 10 lines of products are more than 60 products. Target customers will be sharp, Vizio (60 and 70 inch), Sony (60 inch), Panasonic (60 inch) and channel in mainland China customers (such as SUNY), Vizio, and so on. Now sharp Samsung 60 inch LCD TV Panel supplier, the future is likely to gradually fade. Therefore, Samsung may have alternative sources of supply for its 60-inch TV Panel.
  • Samsung on a 60 inch TV products may be forced to only get a supply from Samsung Panel, Samsung will also focus on the 65-inch, 65 inch Panel can have friends, strange, after all, in the United States, BoE and Panda, and many other vendors.
  • In order to promote its 60-inch product, best time will be the second half of 2012 television season, especially the November Black Friday sales season in North America.Therefore, Hon Hai will begin and the 60 inch product strategy 10 lines of its potential customers to discuss possible cooperation plan. Example is most likely cooperation, sharp panels and company Foundry manufacture mode of cooperation, between October and November this year in terms of costs and prices to attract customers.This terminal products price LCD TV market this year will have a certain effect.

The impact on other television brands and contract manufacturers

Before the Hon Hai to fund, sharp selling its 10 lines for production of 60-inch products are very positive. For example, in last year’s Black Friday sales in North America, sold its 60-inch LCD TV CCFL Backlight only $ 999. Now with Hon Hai’s power, sharp 60 inch product pricing strategy may be more active.

Hon Hai-sharp Alliance will lead to more intense competition, and also brought more price cuts urge the whole supply chain. Sharp in 2011 in North America and Europe by the end of the 60-inch low-price policy has caused a certain amount of pressure on competitors, already there are concerns in the industry now, price wars in particular, more than 60 inch price war, teamed up with Hon Hai and sharp and is only just beginning, and not what we want to become relaxed.

Of course, Hon Hai and more than 60 inch sharp product policy also means that 60-inch product penetration will further improve in the world, particularly in China and the United States market. Hon Hai to sharp’s investment will also affect other contract manufacturers such as performance of the TPV and Wistron. Now with sharp panel power, Hon Hai in the foundry business will be even more powerful.

For more industry news, master the first flat-panel displays and television industry development and welcome to NPD DisplaySearch 2012 China smart TV Forum .Conference invite the leading television brands, Panel manufacturers, operators and technical programmes, covering Intelligent interactive, 3D TV and flat panel industry and networking with naked-eye 3D, AMOLED, LED backlight, TV technology and market value chain. Global sound control, smart synchronization procedure and intuitive man-machine interface control lead program Nuance, Flingo and Hillcrest Labs is also a keynote speech. In addition, NPD DisplaySearch special brings 2012 global TV for consumer survey results to share, as well as the analysis of the usage of network TV and 3D TV.

Welcome to enjoy early bird discount prices, costs include the two-day meeting of the Conference, information (including USB), afternoon refreshments and VIP dinner, is an extension of your contacts, listen to different views and ideas best occasion for policy.For more details, please refer to the Conference Web site www.DisplaySearch.com.CN,or please contact Shanghai offices.

Contact window:
Luo Mei-Director of marketing, DisplaySearch China

Phone:             +86-21-62752555
Mobile phone:             +86-139-1738-2072
Fax: +86-21-32097567
E-mail: michelle.lo@displaysearch.com
Company Web site: www.displaysearch.com.cn

Commentary: The battle cry in the global LCD TV market [DIGITIMES, May 4, 2012]

CEC-Panda, TPV to jointly set up 10G LCD panel line in Nanjing [DIGITIMES, May 4, 2012]

China-based CEC-Panda LCD Technology and Top Victory, a subsidiary of TPV Technology, will jointly invest CNY35 billion (US$5.57 billion) to set up a 10G line for the production LCD panels. CEC-Panda will take up a 99.2% stake in the 10G line, according to an announcement by the companies.

The 10G line will focus on the production of large- and ultra large-size LCD panels for local brand TV vendors in China.

TPV said the establishment of the 10G plant will save a substantial amount of import tariffs due to the local availability of large-size TV panels in China, while strengthening its global competitiveness.

The 10G line has a cost advantage for the production of large-size panels, according to industry sources. Glass substrates at the 10G line can be cut into eight units of 60-inch TV panels compared to a yield of three units from the 8.5G lines at Samsung Electronics and LG Display, the sources indicated.

However, Taiwan-based panel makers are currently reluctant to commit investments on 10G lines due to heavy capital requirements and the financial strain, the sources commented.

TPVision  [TP Vision] likely to showcase OLED TVs in 2012 IFA, say sources [DIGITIMES, April 17, 2012] TP Vision

TPV Technology has finished a takeover of LCD TV business operations from Philips through the establishment of a joint venture, TPVision [TP Vision], which is expected to showcase OLED TVs at the 2012 IFA consumer electronics trade fair to take place in Berlin, Germany from August 31-September 5, according to industry sources.

TPVision  [TP Vision] is likely to purchase large-size OLED panels from LG Display for its production of OLED TVs, the sources noted.

For 2012, TPVision  [TP Vision] will continue to launch a series of high-end LED, 3D, and smart TVs under the Philips brand, including the Philips 3500, 4000, 6000 and 7000 lineups, said the sources.

In China, TPVision  [TP Vision] will release the 5-series of Philips-branded models, including PFL5825, 5820 and 5721, supporting Philips’ Ambilight and AmbiwOOx technologies, added the sources.

Increased competition in TV sector as Korean brands promote OLED TVs [DIGITIMES, April 30, 2012]

Competition in the TV sector is continuing to grow as Korean firms are reporting increased sales and developing their TV technology.

Samsung Electronics’ consumer electronics business, which includes TVs, saw its operating profits grow 550% on year to US$467 million in first-quarter 2012 as Smart TV and LED TV sales increased. This is mostly in part because of the firm’s success in commercializing technologies for Smart TVs, OLED TVs and direct-type LED TVs, commented industry observers.

Despite Japanese brands designing TVs that have 3D and Internet connection features, Korean-brand TVs have better voice-controlled functions and are more advanced with OLED technology, added the sources.

With Samsung setting a shipment of 48 million LCD TVs, and LG Electronics 46 million for 2012, the target of Sony, the third laregest TV vendor in 2011, is only 20 million units. Sony says its focus has shifted from boosting unit shipments to providing high value added products.

However, Samsung is set to merge its subsidiaries, Samsung Display, Samsung Mobile Display and S-LCD into one for OLE technlogy development, with the sources saying OLED technology mature may not mature until 2013-2014. However, the sources said Korean manufacturers will get the upper hand on the OLED industry before Japanese and Taiwan brands, which will pose challenges in the market.

China TV firms see increasing sales as domestic demand heats up [DIGITIMES, May 7, 2012]

China TV firms have overtaken Japanese and Korean ones in China’s market as Chinese consumers are increasingly purchasing LCD TVs.

Sources said China brands are pushing their products domestically mainly in third- and fourth-tier cities as populations there are seeing economic growth.

Chinese brands have smart TVs similar to Korean and Japanese brands with functions such as voice control and cloud computing, and they have price advantages over Japanese and Korean ones, making their TVs a popular choice for domestic consumers added sources.

Chinese brands are looking to become more competitive by putting more added value features in their products and are figuring out strategies for expanding sales abroad amongst Korean firms pushing their OLED technology and Japanese firms lowering prices for high-end LCD TVs.

Display Research, however, stated that China’s market will see a big shift in 2012 as past government subsidies for purchasing new energy efficient TVs have already expired, making China’s TV brands more reliant on what kind of competitive edge they can offer for consumers.

Foxconn may receive large-size TV orders from Vizio, say sources [DIGITIMES, May 7, 2012]

Foxconn Electronics is likely to also land large-size OEM TV orders from Vizio in addition to existing clients including Sharp and Suning Appliance after it took up a 46.5% stake in Sharp’s 10G LCD panel line, according to industry sources.

The inclusion of Vizio into the Sharp-Foxconn alliance is also expected to result in a reduction in shipments of 60-inch TV panels to Samsung Electronics, which has been counting on Sharp and in-house facilities for the supply of large-size panels, the sources indicated.

The possible shift of shipment policy at Sharp will force Samsung to focus on 65-inch products with the 65-inch panels coming from AU Optronics (AUO), Chimei Innolux (CMI) or even BOE Technology, the sources noted.

Foxconn is expected to see its shipments of OEM TVs reach 10 million units in 2012, including eight million units to Sony, 1.5 million units to Sharp and the remaining to Panasonic, Vizio and Suning, said the sources.

Foxconn’s increasing shipments of OEM TVs will also affect rival company Wistron, which is expected to see its OEM TV shipments slide to five million units in 2012 compared to eight million in 2011, the sources estimated.

End of Updates

Sharp Sells Stake to Hon Hai [Foxconn] [WSJDigitalNetwork YouTube channel, March 27, 2012]

Discussion with George Stahl, Dow Jones Newswires Managing Editor, and Michael J. Casey, Dow Jones Newswires Managing Editor

Sharp Establishes Strategic Global Partnership with Hon Hai Group [Sharp press release, March 27, 2012]

Sharp Corporation (hereinafter “Sharp”) entered into agreement today with Hon Hai group, the world’s leading EMS (electronic manufacturing service) company, to establish strategic global partnership to collaborate in various business fields, and to issue new shares to Hon Hai group through third-party allotment (hereinafter “the issuance of new shares through third-party allotment”).

The market surrounding electronics industry is becoming severe, with rapid price decline due to the development of digital technology and increasing competition in a global market. We believe the timely action is necessary to tackle these changes in the market.

Looking at the business environment, Hon Hai Precision Industry, the key company of Hon Hai group, saw Sharp’s LCD technology with high reputation, and decided to procure ultimately up to 50% of large-size LCD panels and LCD modules manufactured at the LCD panel plant in Sakai-city, Osaka, Japan. The LCD panel plant will be mutually managed by one company set by partner companies.

In addition, this partnership allows each company to establish a new business model, combining each company’s strength, to launch cost competitive component and products fit to market demand by utilizing Sharp’s potential for the development of one-of-a-kind components and products with Hon Hai group’s mounting technology and cost competitiveness.

Sharp plans to enhance this partnership by broadening the collaboration field, to allocate funds received from Hon Hai group by the issuance of new shares through third-party allotment, to the investment for the new technology introduction, to increase mid-and long- term profitability, and to strengthen competitive edge in the global market.

Overview of Strategic Partnership

1. Stabilize LCD panel plant operation in Sakai and strengthen cost competitiveness by purchasing power of Hon Hai Precision Industry

Hon Hai Precision Industry will procure ultimately up to 50% of LCD panels and LCD modules manufactured by SDP. Both companies will mutually take in part of the management through one company set by partner companies, which enables stable operation of the LCD panel plant in Sakai.

The two companies will take advantage of the economy of scale and material procurement in LCD panel and LCD TV fields, and will further enhance cost competitiveness in the global market.

*Share holding rate of SDP:
Current status:
Sharp:   Approx. 93%
Sony:   Approx. 7%
After signing the partnership:
Sharp:   Approx. 46.5%
Terry Gou and others including investment corporations:   Approx. 46.5%
Sony:   Approx. 7%

2. The issuance of new shares to Hon Hai group through third-party allotment

Sharp will issue new shares to Hon Hai group through third-party allotment (the number of new shares to be issued: 121,649,000 shares)

*The issuance of new shares through third-party allotment and share holding rate after the issuance of new shares:
Hon Hai Precision Industry Co., Ltd.:   4.06%
Foxconn Technology Co., Ltd.:   0.65%
Foxconn (FAR EAST) Limited:   2.53%
Q-Run Holdings Limited:   2.64%
[Total of 9.88%]

Hon Hai Goup's and other ownership in Sharp -- as agreed on 27-March-2012

Source information is from: Issuance of New Shares Through Third-Party Allotment Associated with Business Alliance and Partial Transfer of Shares in Subsidiaries [Sharp Corporation, March 27, 2012] as per the following essential details compiled from that:
Capital Increase Through Third-Party Allotment (no director from Hon Hai is scheduled to be dispatched as of today in association with the Capital and Business Alliance): with issue price of 550 yen per share
Hon Hai Precision Industry Co., Ltd ([also known as Foxconn, http://www.foxconn.com/] represented by chairman: Terry Tai-Ming Gou)
– major shareholder and ratio of shareholding: Terry Tai-Ming Gou 12,02%
– 50,000,000 shares [27,500 million yen = US$ 332.0M]
Foxconn Technology Co., Ltd (represented by president: Lin, Don-Lang)
– [as per Businessweek: engages in the design sales and manufacturing of Mag/Al casing and mechanic parts primarily in Taiwan. It also involves in the design sales and manufacturing thermal modules for O/T, NB, server, and other 3C products. In addition, the company engages in the design sales and assembly of consumer electronic products.]
– major shareholder and ratio of shareholding: Hon Hai Precision Industry Co., Ltd 10,09%
– 8,029,000 shares [4,415,950 thousand yen = US$ 53.3M]
Foxconn (FAR EAST) Limited (represented by directors: Yu Huang, Chiu-Lian, Lee Jin-Ming)
– [as per Annual Report for 2010*: Investment holdings in Mainland China, Europe and North America and Hong Kong electronics manufacturers]
– major shareholder and ratio of shareholding: Hon Hai Precision Industry Co., Ltd 100%
– 31,143,000 shares [17,128,650 thousand yen = US$ 206.8M]
[*for Hon Hai Precision Industry Co., Ltd and subsidiaries consolidated]
Q-Run Holdings Limited (represented by director: Lee Han-Ming)
– [as per Businessweek: through its subsidiaries manufactures and distributes computer thermals and hardware parts]
– Foxconn Technology Co., Ltd 100%
– 32,477,000 shares [17,862,350 thousand yen = US$ 215.6M]
Total: 121,649,000 shares[66,906,950 thousand yen = US$ 807.7M]
Transfer of Shares in a Subsidiary: Sharp Display Products Corporation
Terry Gou (Terry Tai-Ming Gou):
– 1,320,000 shares providing a holding rate of 46.48%
(Sharp Corporation the same 46.48%, Sony Corporation 7.04%)
– Transfer price: 66,000 million yen [US$ 796.8M]
(as per the registered capital: 6,972 million yen [US$ 84.2M])

Sharp and Sony Amend Agreement Regarding Joint Venture to Produce and Sell Large-Sized LCD Panels and Modules [Sharp press release, March 28, 2012]

Sharp Corporation (“Sharp”) and Sony Corporation (“Sony”) announced that they have agreed to further amend the joint venture agreement originally executed by the parties in July 2009, as amended in April 2011, for the establishment and operation of Sharp Display Products Corporation (“SDP“), a joint venture to produce and sell large-sized LCD panels and modules.

Pursuant to the April 2011 amendment, Sharp and Sony discussed possible further contributions by Sony to SDP, but they have agreed that Sony will not make additional capital injections to SDP. The parties have also agreed to set a new time period, up to the end of September 2012, to permit study of the future direction of the joint venture, including with respect to the treatment of the shares that Sony has in SDP (7.04% of all issued shares) and possible purchases of large-sized LCD panels and modules. Under the March 2012 amendment, Sony may require that Sharp acquire all of Sony’s shares in SDP, even before the end of September 2012, upon the occurrence of certain events such as a transfer by Sharp to any third party of some or all of the shares that Sharp has in SDP.

On July 1, 2009, Sharp transferred its LCD panel plant in Sakai City, Osaka Prefecture, to SDP. On December 29, 2009, Sony invested 10 billion yen into SDP in exchange for new shares issued by SDP to Sony (representing 7.04% of the issued shares in SDP) and, as a result, SDP became a joint venture company of Sharp and Sony. Since then, Sharp and Sony have continued discussion about possible further contributions by Sony to SDP.

Nokia trying the first Lumia month in China with China Telecom exclusive

Update: Nokia Recruits Locals to Compete in China [Business Week, March 28, 2012]

“In China, the game is far from over,” said Derek Ling, who runs Tianji, China’s biggest professional networking site with 9 million users. “The iPhone is not nearly as dominant in China as it is in the U.S.” Apple has been “having difficulty negotiating the right terms with the biggest provider in China, which is China Mobile (941), so everything is up for grabs.”

Advantages of such a launch strategy for Nokia:

    1. China Telecom has been a top 3G performer so far (3G subscribers in millions):
      3G Subscribers in China - 3 operators -- Dec-10--Feb-12
    2. A one time opportunity to gauge high-end Lumia performance against the current market leader as: China Telecom to Offer iPhone 4S in China on March 9 [China Telecom press release, Feb 21, 2012]
      China Telecom today announced it will offer iPhone 4S to customers in China beginning Friday, March 9. iPhone 4S will be available starting at RMB 0 for the 16GB, 32GB and 64GB models on select contracts in China Telecom’s authorized stores and online at http://www.189.cn. Online reservations will be available beginning Friday, March 2.
      image
      image
      source: Annual Results 2011 – China Telecom Corporation Limited [March 20, 2012]
    3. As such it is also a very good fit for Nokia’s Lumia strategy is capitalizing on platform enhancement opportunities with location-based services, better photographic experience etc. [Jan 12, 2012]: … in 2011, China Telecom … accelerated development of innovative businesses, with substantial progress in the strategy of the “Three New Roles” (i.e. “a leader of intelligent pipeline”, “a provider of integrated platforms” and “a participant in content and application development”); …
      source: China Telecom 2012 Annual Work Conference Highlights [Dec 21, 2011]
      image
      source: Annual Results 2011 – China Telecom Corporation Limited [March 20, 2012]
    4. A very good fit for Exclusive applications and services [strategy of Nokia] for a uniquely local experience:Wang Xiaochu, Chairman of China Telecom and Stephen Elop, CEO of Nokia on stage with Nokia 800C
      China Telecom and Nokia have worked closely together
      to bring integrated China Telecom services that target young people including music, games, videos, and integrated reading apps right onto the Nokia 800C home screen.  To reach this target market, the Nokia 800C will be featured prominently in Tianyi FlyYoung shops, a distribution arm and new, youth-centered sub-brand of China Telecom.People purchasing Nokia Lumia  smartphones in China will have access to exclusive applicationssuch as magazines from Trends and special offers for free downloads of popular gaming titles such as Fruit Ninja and PVZ.- Trends, a provider of highly interactive fashion magazine applications, will launch Cosmopolitan first forNokia Lumia smartphones and provide people using a Nokia Lumia phone with free access to For Him Magazine (FHM), Harper’s Bazaar and Esquire magazines inMarketplace, opening today.
      – As an added incentive for  people using a Nokia Lumia smartphone in China, Nokia will soon offer 100,000 free downloads of the hit gaming titles Fruit Ninja and PVZ through the Nokia Collection in Marketplace.

      Nokia and Microsoft also announced the Be Top program, which is designed to encourage and support developers in creating great new applications on Windows Phone specifically for people in China.

      These exciting offers and the BeTop development program illustrate Nokia’s commitment to the local ecosystem of application developers and service providers. Through joint innovation with leading local providers, Nokia is able to offer Lumia users access to all major Internet services in China including Sina, SOHU, Tencent and Renren. When paired with the choice of nearly 20,000 apps available for download through Marketplace, people using a Nokia Lumia smartphone in China can create a truly personalized and locally relevant experience on their device.

Source: China Telecom and Nokia launch first CDMA Windows Phone in China [Nokia press release, March 28, 2012]

More information:
Nokia launches first CDMA Windows Phone in China [Windows Phone blog, March 28, 2012]
China says Ni Hao to the Nokia Lumia [Nokia Conversations, March 28, 2012]
Nokia seeks to retake China market share [Reuters, March 28, 2012]

Nokia Chief Executive Stephen Elop unveiled two models based on the Lumia 610 and Lumia 800 cellphones but designed for Chinese networks, which will go on sale initially through China Telecom, the nation’s third-largest carrier.

The Lumia 800C will be sold without a carrier contract for 3,599 yuan ($573) from April, Elop said. Pricing for the 610C, to launch in China in the second quarterand intended as an entry-level phone to bring younger users to Nokia Windows phones, will be announced later.

Nokia also plans to bring its 700, 800 and 900 models to the China market, and they will eventually run on all three of China’s mobile networks, including China Mobile and China Unicom, said Colin Giles, Nokia’s executive vice president for global sales.

He would not give a time frame for their introduction to the Chinese market, for which they are specifically designed. “We’ve invested heavily in China,” Giles told reporters. “We’re creating innovation in China for China, which a number of our competitors aren’t doing.”

Shares in Nokia rose 3.6 percent to 4.14 euros, boosted after Sweden’s Swedbank lifted its rating on the stock to “buy” from “neutral”.

Nokia has lost its No. 1 position in the Chinese mobile handset market to Samsung, with Samsung at 24.3 percent and Nokia 19.6 percent in the fourth quarter of last year, according to market researcher Gartner.

China’s Huawei Technologies and ZTE stood at 12.6 percent and 11.1 percent, respectively, with Apple a small but buzz-grabbing 7.5 percent.

Huawei Enterprise after its 1st year and the 2012 strategy

Huawei Enterprise at CeBIT 2012 – Press Conference – Geoff Johnson, Research VP, Gartner [HuaweiEnterprise YouTube channel, March 13, 2012]

Geoff Johnson, Research VP at Gartner, discusses Huawei Enterprise’s position in the market and our range of enterprise business solutions

Huawei Enterprise at CeBIT 2012 – Press Conference – David He discusses our first year [HuaweiEnterprise YouTube channel, March 13, 2012]

David He, President of Marketing, Huawei Enterprise, discusses our first year in business and our plans for the future.

Started with: Huawei Boosts Investment In European Enterprise Tech[TechWeekEurope, Sept 16, 2011]

Chinese networking and telecoms company Huawei has announced a programme of investment to kick-start its entry into the enterprise market in Western Europe.

Huawei first launched its Western European enterprise division in 2010, and has since built up a workforce of around 400 employees, spanning the UK, Ireland, France, Germany, Spain, Portugal, Italy, Switzerland and ‘Benelux’.  The division is headquartered in Amsterdam.

Although the company was unable to name an exact figure, it said the new investment would enable it to double its headcount in the region year-on-year, as well as to build a new sales channel structure in Europe.

“The European region is a key market for Huawei Enterprise,” said Mario Fan, President for Huawei Enterprise Business for Western Europe. “Since we first established our European presence a year ago, we have made tremendous progress. We will build on this strong start by placing an emphasis on developing partnerships with customers, integrators and resellers at all levels.”

Huawei is now commencing a regional tour of 18 cities in its Enterprise Business Roadshow, starting in Amsterdam and ending in Utrecht on 7 December. Customers and prospective partners can visit the company’s showtruck for demonstrations of its data centre and networking technologies, as well as its corporate communications solutions.

Huawei Showtruck Launch [HuaweiEnterprise, Sept 30, 2011]

Huawei Enterprise is proud to announce the start of the Huawei Showtruck tour. Over 12 weeks, visiting 18 cities the Showtruck aims to bring Huawei Enterprise solutions to you. Stop by to view live demonstrations of our innovative communications solutions and ask our experts questions. Some of the products we will be showcasing include our open IP network One Net, Data center and Cloud based applications, and One World and One Office telepresence systems amongst many others.

Huawei Enterprise rolls into Middle East [ITP.net, Jan 19, 2011] see also: follow-up on that [ITP.net, Aug 7, 2011] + another follow up [CommsMEA, March 26, 2012]: “to grow its enterprise business in the Middle East by between 80-90% in 2012 to reach revenues of up to $600 millionachieved revenues of about $320 million in 2011, with a year-on-year growth rate of about 85-90% … particularly strong growth in the Gulf and Iraq, with government projects and the oil and gas sector

Huawei has announced the official launch of its enterprise business unit in the Middle East.

The company is kicking off its regional enterprise business, which will focus on providing end-to-end ICT solutions to key regional vertical sectors, with a roadshow to take in UAE, Saudi Arabia and Pakistan.

The company is already well established in the region through its telecoms operations, and already has several enterprise customers such as Saudi Aramco, Saudi Ministry of Health, and the new Maktoum Airport in Dubai, but the new unit will focus on provision of solutions to the enterprise segment.

Huawei will be focusing on government and semi-government entities in the region, particularly in energy and power sector, transportation, oil and gas, and SMART cities. The company’s enterprise offerings include expertise infrastructure solutions from data communications (includes security and firewalls, switches, routers, VPN, voice and video communications solutions including high-end unified communications), to transmission to help with integration industrial automation in manufacturing plants, to setting up large scale wireless broadband and WIMAX solutions.

Speaking at a launch event in Dubai, Mr Dongwu, general manager for the Middle East for Huawei Enterprise, commented: “We see convergence in the IT and communications technology, with this kind of convergence, enterprises need both kinds of technologies. As Huawei we have a solid background and experience in communications technologies over the past 20 years, and our IT experience of the past ten years, through business units like Huawei Software, puts us in a unique position that gives us very good opportunities to penetrate the market.

See also: Huawei unveils Enterprise Business unit [for Middle East] [Reseller Middle East, Jan 18, 2011]

Huawei Climbs ‘Food Chain’ in Cisco Enterprise Challenge [Bloomberg, May 9, 2011]

… “Cisco is clearly the leader in this domain, but we also believe changes are happening,” Leon He, president of solution sales at Huawei’s enterprise business unit, said in an interview in Shenzhen, China. “When those changes occur, the current market and customer needs will change.” …

“Enterprise is our core capability,” Cisco Chief Executive Officer John Chamberstold investors at a technology forum on April 7. “We’re an enterprise company. That’s where we started.”

The enterprise business and public sector contribute about 46 percent to Cisco’s sales, Chambers said. David McCulloch, a spokesman for Cisco, declined to comment.

“The market Huawei sees is huge,” Huawei’s He said. “If we digitize, we will bring a revolution. When the shift occurs from digital to smart networks, that will be another revolution.”

Huawei aims to double annual sales at its enterprise group to $4 billion this year, from $2 billion last year, He said. Within three to five years sales will more than triple again to between $15 and $20 billion, He said. Huawei’s Roese said the company is moving 10,000 employees into the new enterprise division, including 6,000 research and development staff. That’s about 9 percent of the company’s 110,000 staff worldwide.

The initiative is being led by William Xu Wenwei, one of four executive directors on the company’s 13-member board, according to its annual report released last month.

See also a follow-up on that [Bloomberg, Feb 29, 2012]:

Growth at Huawei Enterprise may be slower than originally anticipated, Xu said, adding that $15 billion in contract revenue by 2015 is a more realistictarget. Leon He, another Huawei executive, in May last year gave a sales projection of $15 billion to $20 billion for the division.

That more cautious outlook stems from a change in strategy where Huawei now works more through system integrators such as Spain’s Telefonica SA (TEF) to create solutions for specific industries.

“In the past, in the previous strategy there was more high-level integration so there was more conflict with our partners,” Xu said. “As a result our sales revenue might not be as high as in the past strategy, but we’ll have closer cooperation.”

Still, the enterprise business plans to increase its workforce to more than 20,000 people this yearfrom over 10,000 at the end of 2011, Xu said.

The enterprise unit is making about 40 percent of its sales in China, Xu said, adding that that ratio will probably remain steady through 2015.

More of the same kind:
Huawei targets corporate sector [FT, March 8, 2011]
Huawei enters the enterprise market [in Norway] – a game changer or just another player? [primesource.no, March 18, 2011]
Huawei Malaysia Forms Enterprise Division [Hardware Zone Malaysia, July 7, 2011]
(But partner driven entrance to Malaysia began on Feb 8, 2011: see the Huawei Enterprise Business [Feb 8, 2011] presentation delivered by HD Technology Sdn Bhd. (a distributor of storage products and solutions), since 51% of acquired by Vasseti Berhad owned by Vasseti (UK) plc controlled by rich entrepreneur Syed Mohd Yusof Bin Tun Syed Nasir (the owner of the Concorde Hotel chain in Malaysia), and an investment holding company focused on acquiring the majority of the supply chain of the telecommunications and information and communication technology industry.)
Huawei appoints new VP of Enterprise [in UK and Ireland] [mobile news, Sept, 2011]
Huawei to Launch HEAP [Huawei Enterprise Advantage Partner] Partner Program in Australia [ARNnet, Sept 16, 2011]
Huawei Launches Enterprise Business Unit in India [Indo-Asian News Service, Sept 28, 2011]
Huawei Launches Its U.S. Enterprise Business Through Channels [Huawei Enterprise press release, Oct 5, 2011]
Huawei Building Up Its Enterprise Muscle [Digital Life, Singapore, Nov 2, 2011]
Huawei Launches Partner Program in HK and Macau [telecomasia.net, Hong Kong, Nov 4, 2011]
Webcom Appointed as Huawei Reseller [in South Africa and sub-Saharan Africa] [IT-Online, Nov 11, 2011]
Huawei Builds Channel Red Army in Europe – a distribution deal with SDG to punt its enterprise kit to resellers in the UK, France and the Netherlands [The Register, Nov 24, 2011]
Huawei to Reach a Thousand Partners in Europe [Dealer World, Spain, Jan 1, 2012]
Huawei Hails Thailand as Regional Hub [for enterprise business in Southeast Asia] [Thai News Service, Nov 24, 2011]

2012 market expansion from Germany’s CeBIT to the whole western hemisphere: Huawei Germany Celebrates 10 Year Anniversary [HuaweiEnterprise YouTube channel, March 7, 2012]

Huawei Germany kicks off the year with a grand anniversary celebration of its 10 years of successful business operations in Europe and Chinese New Year with over 350 guests

Involving resources of Taiwan as well: Huawei’s Enterprise Market Expansion Attempt to Benefit Taiwan’s ICT Supply Chains [CENS, March 26, 2012]

Huawei Technologies Co., a world leading ICT supplier headquartered in mainland China, will place orders with Taiwan’s supply chains in a big way in line with its aggressive goal of boosting sales of its enterprise equipment operation to US$15-20 billion in 2015 from current US$3.9 billion.

The company would record higher outsourcing to Taiwan in 2012 than in 2011, when which it purchased NT$110 billion (US$3.6 billion at US$1:NT$30) worth of products from Taiwan. In 2010, Huawei contracted Taiwanese manufacturers to supply NT$99.5 billion (US$3.3 billion) of products.

To quickly gain more market share worldwide, Huawei has decided to increase contracts to Taiwan for ICT products, including servers, switchers, routers, mobile phones, network connectivity cards, tablet PCs and touch screens. The company’s global vice president for enterprise business operation, Jia Cholong, stressed that Taiwan is a strong logistics backup for his company’s aggressive global plan.

The company’s contract suppliers in Taiwan include Hon Hai Precision Industry Co., Ltd., Accton Technology Corp., Unizyx Holding Corp., Gemtek Technology Corp., Alpha Networks Inc., and Unimicron Technology Corp.

Jia emphasized that Huawei will team up with distribution channels of local markets worldwide to expand market pie in international enterprise ICT sector, instead of acting as a price killer.

He noted that the company’s enterprise ICT operation saw sales rise to US$3.9 billion in 2011 from US$2 billion in 2010 and US$100 million in 2009. The company aims at shooting the No.2 title in enterprise ICT market and No.3 spot in cloud-computing market in 2015.

The company’s enterprise ICT products include video conferencing equipment, data center, cloud solution, switching equipment, router, firewall, and servers.

In line with its aggressive market plan, the company will double its marketing staff to 20,000 worldwide by the end of this year. In Taiwan, it now has 200 marketing staffers and will open Huawei Certified Datacom Associate (HCDA), Huawei Certified Datacom Expert (HCDE) and Huawei Certified Datacom Profession (HCDP) centers to verify telecom equipment for it.

With major product expansion in Huawei Server line [Huawei Enterprise product catalogue, Feb 27, 2012]

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Huawei Enterprise at CeBIT 2012 – Press Conference – Johann Strauss on Technology and Intel [HuaweiEnterprise YouTube channel, March 13, 2012]

Johann Strauss, and guest spokesperson from Intel, discuss the latest technology and our partnership with Intel

See also:
Huawei Unveils Tecal V2 Servers with Intel® Xeon® E5-2600 Inside [Huawei Enterprise press release, March 20, 2012]

Huawei Showcases A Better Way for Enterprises in the ICT Era at CeBIT [Huawei Enterprise press release, March 5, 2012]

Huawei, a leading global information and communications technology (ICT) solutions provider, along with its partners, will be showcasing its comprehensive range of integrated ICT solutions at CeBIT, one of the largest technology trade shows. Addressing specific needs of enterprise customers across various industries, Huawei helps global organizations tap on opportunities presented by the changing trends in today’s ICT era.

Bringing to life its vision of “A Better Way” for enterprises, Huawei, along with 12 of its solution partners, will be showcasing its comprehensive portfolio of products and solutions at CeBIT.

“CeBIT is one of the most important trade shows globally and is a key platform for us to showcase how Huawei’s integrated ICT approach can help enterprises meet the challenges of tomorrow,” said, David He, President of Marketing, Huawei Enterprise. “We will also be making a series of major announcements regarding our channel partner program, as well as unveiling our latest line-up of products and solutions.”

At the exhibition booth, Huawei experts and consultants will be on-site to conduct demonstrations on how its innovations and capabilities in cloud computing, network solutions, and unified communication and collaboration can help enterprise organizations improve business operations and achieve competitiveness in today’s changing ICT landscape. Vertical solutions that address unique customer needs in their respective industries will also be showcased. Demonstrations will also be held in a custom-built Huawei Container Data Centre. Highlights of the products and solutions on display include:

Huawei @ MWC 2012: Industry Trends in Cloud Computing. Ron Raffensberger, Director of Cloud Computing Marketing Ron Raffensperger discusses Huawei’s approach to the latest trends in cloud computing, including consulting services, software as a service and ecosystem alliances.
Huawei Modular Data Center (IDS2000). Huawei talks about how their modular data center system provides Simple Deployment, Scalable Design, Energy Saving and Smart Management for their Modular Data Center solution for enterprises, anyone building data centers.

Cloud computing – Overview of Huawei’s cloud computing capabilities and related IT/IP products, as well as data centre security solutions, desktop cloud solution, media cloud solution, etc.

Huawei eSight Mobile, mobile/tablet app for Network Administrators. Huawei provides a new application on iPad/iPhone, soon Android, to let IT Administrators do some or all of their Network Management on thei mobile devices. Here’s Huawei’s presentation at CeBIT 2012 presenting their new system.

Enterprise ubiquitous broadband network – Introduction to Huawei’s network solution, as well as solutions for WAN connectivity, campus networks and enterprise branches; Huawei’s network management solution eSight will also be showcased.

Huawei eSpace Unified Communications. Huawei provides this system to connect teams of people that collaborate in enterprise, schools and other.

Unified communication & collaboration– Demonstration of Huawei’s high-definition telepresence solution, Huawei’s eSpace Unified Communications Solutions, and eSpace Cloud Contact Center, etc.

Industry solutions– Comprehensive overview of vertical-specific solutions including eGovernment and public services, Virtual Teller Machines (VTM) for the finance industry, and Intelligent Transportation System (ITS), etc.

In addition to showcasing its products and solutions, Huawei will conduct a series of open speeches and technical symposiums at its booth throughout the week-long CeBIT event. Ranging from 15 minutes to 50 minutes, these sessions allow industry professionals to better understand how Huawei’s customer-centric innovations can be applied to their business. A full schedule of open speeches and technical symposiums is available at http://www.huawei.com/minisite/cebit2012/index.html.

Huawei will also organize a series of events specially for customers and channel partners on March 7. At the ICT Transformation and Innovation Forum, Huawei customers will hear from senior Huawei executives and industry experts on the outlook for the industry. Channel partners will learn more about Huawei’s outlook and direction for the year at the Huawei Channel Conference.

On March 8 and 9, various Huawei executives will speak at CeBIT-organized events, including Broadband World Forum, CeBIT Lab Talk. At Broadband World Forum, Huawei executives will present on Omnipresent Wireless Broadband, as well as its vision and strategies for Enterprise Network in the Era of Cloud and Internet of Things (IoT). Huawei will also address industry professionals at CeBIT Lab Talks on topics including, green intelligent cities, the cloud era, and enhancing public-private clouds by optimizing IT infrastructure.

Huawei’s booth is located at Hall 13, Booth C23 and its custom-built Container Data Centre is located at the open-air sites outside Halls 12 and 13. CeBIT is held from March 6 to 10, 2012, in Hanover, Germany. For more information on Huawei’s participation and events, please visithttp://www.huawei.com/minisite/cebit2012/index.html.

Huawei’s Booth at CeBIT2012

About Huawei Enterprise Business Group

Huawei Enterprise Business Group (“Huawei Enterprise“) is one of Huawei’s three business groups (BGs) [the other two are Devices and Telecoms Infrastructure]. Leveraged by its strong R&D capabilities and comprehensive technical expertise, Huawei Enterprise provides wide ranging and highly efficient ICT solutions and services. Together with partners, Huawei Enterprise offers solutions for vertical industry and enterprise customers globally including government and public sectors, transportation, power grids, energy, and finance, as well as commercial enterprises in many fields. These innovative and leading solutions cover network infrastructure, UC&C, cloud computing & data center, and industry application solutions.

For more information, please visit http://enterprise.huawei.com

Follow us on Twitter: www.twitter.com/huaweiENT

Facebook: http://www.facebook.com/HuaweiEnterprise

LinkedIn: www.linkedin.com/groups/Huawei-Enterprise-4070523?home=&gid=4070523

CeBIT 2012 – Keynote – John Roese – The ICT Approach to a Smarter Enterprise [HuaweiEnterprise YouTube channel, March 12, 2012]

John Roese – Senior Vice President and GM North American R&D at Huawei Keynote speech on The ICT Approach to a Smarter Enterprise

Huawei Outlines A Better Way to Accelerate the Enterprise Evolution [Huawei Enterprise press release, March 6, 2012]

Huawei, a leading global information and communications technology (ICT) solutions provider, along with its partners, today showcased a wide range of integrated ICT solutions that meet the specific needs of different industries, demonstrating how Huawei’s capabilities are able to help global organizations tap on opportunities presented by the changing trends in today’s ICT era at CeBIT, one of the largest technology trade shows.

At the keynote presentation on the first day of CeBIT, John Roese, Senior Vice President of Huawei’s North America R&D, shared with over 400 enterprise CIOs and IT experts the new reality for enterprises brought about by the “consumerization of IT”, and the paradigm shift required to address it. Compared to the continuous innovations in the device and internet industries which have resulted in the rapid growth and development of the consumer market, the enterprise technology market has lagged behind in innovation.

Enterprises need to respond to new challenges brought about by the “consumerization of IT”, and can no longer ignore new technologies that are being introduced into the enterprise space. With the convergence of communications, enterprise and consumer technologies, enterprise organizations need to fully leverage innovative ICT technologies to better address challenges and manage their business so as to enhance competitiveness.

“Huawei’s comprehensive capabilities and experience in communications technology, enterprise and consumer industries places us in a unique position to help our enterprise customers succeed in today’s era of ICT convergence. Based on customer-centric innovations, Huawei’s solutions help enterprise customers accelerate the shift in the evolution and development of ICT,” said Roese.

John Roese, Senior VP of Huawei’s North America R&D, Delivering a Keynote Speech On Day One of CeBIT

Bringing to life its vision of “A Better Way” for enterprises, Huawei, along with 12 of its solution partners, will be showcasing its comprehensive portfolio of integrated ICT products and solutions at CeBIT. This includes capabilities in cloud computing, data centers, network solutions, and unified communications and collaboration that help enterprise organizations improve business operations and achieve competitiveness in today’s changing ICT landscape. Additionally, sector-specific ICT solutions will also be showcased for industries including government and public sector, electricity, transportation, finance, energy and large enterprises. Huawei’s container data centre will also be situated outside the Huawei exhibition hall to showcase mobile data center capabilities.

NEW TABLETS PREMIERE AT HANNOVER CeBIT [HuaweiEnterprise YouTube channel, March 12, 2012]

CCTV reporting and interviewing John Roese – Senior Vice President and GM North American R&D

Huge sector-specific marketing efforts already started (excerpts only if any):

Only Energy so far: they are definitely piloting the return effects from such an approach
Huawei to Appear at World Top Gas Conference In 2012 [Huawei Enterprise press release, Jan 18, 2012]
Huawei Participates In 2012 Summits of Energy Industry [Huawei Enterprise press release, Jan 18, 2012]
Huawei Assisted PetroChina To Organize 2011 Annual Convention [Huawei Enterprise press release, Jan 17, 2012]
Accelerating Energy Business Development, Huawei Attracts Visitors From Home and Abroad [Huawei Enterprise press release, Jan 17, 2012]
Huawei to Attend 2012 Offshore Technology Conference [Huawei Enterprise press release, Jan 16, 2012]
Huawei Makes a Debut in the 20th World Petroleum Congress [Dec 4, 2011, Doha, Quatar] [Huawei Enterprise press release, Jan 15, 2012]
Huawei Eyeing Opportunities with Smart Energy Technology [Huawei Enterprise press release, Oct 24, 2011]
Huawei Accelerates Enterprise Informationization with Digital Energy Solution [Huawei Enterprise press release, March 20, 2012]

Huawei, a leading global information and communications technology (ICT) solutions provider, today announced the launch of its digital energy solution at the 12th China International Petroleum & Petrochemical Technology and Equipment Exhibition (“CIPPE”), the world’s largest petroleum exhibition. At the exhibition, Huawei’s Enterprise Business Group will be showcasing how its ICT solutions provide “A Better Way” to meet the specific needs of energy enterprises to enhance productivity and accelerate informationization.

Hank Stokbroekx, Deputy of Enterprise Services, Huawei Enterprise, announces Global Programs for Channel Partners and ICT Training and Certification [HuaweiEnterprise YouTube channel, March 13, 2012]

Huawei Enterprise Launches Global Programs for Channel Partners and ICT Training and Certification [Huawei Enterprise press release, March 7, 2012]

Huawei, a leading global information and communications technology (ICT) solutions provider, today officially launched its channel partner program, aimed at driving growth for its Enterprise business, as well as the industry’s most comprehensive ICT training and certification program.

“We are dedicated to providing highly efficient ICT solutions and services to our customers, and an important component of our plan is to expand our reach by building a healthy channel partner ecosystem,” said William Xu, Senior President of Huawei and CEO of Huawei Enterprise Business Group. “Together with our channel partners, we intend to lead the industry with a dual devotion to customer-centric innovation and service, while tapping in to Huawei’s vast experience to help enterprise customers navigate the challenges and opportunities in today’s ICT era.”

“We laid the foundation for Huawei Enterprise in 2011 by introducing our value proposition that Huawei Enterprise represents ‘A Better Way’ to do business,” said David He, President of Marketing, Huawei Enterprise. This credo guides everything we do at Huawei Enterprise—from our commitment to our customers, partners, and the entire industry to our devotion to innovation through extensive investments in R&D.”

Supporting the long-term development of the Enterprise business, Huawei Enterprise’s latest channel strategy is designed to broaden its roster of partners by offering a comprehensive product portfolio, cutting edge R&D, and strong long-term expansion opportunities.

Huawei will be building the channel partner ecosystem by recruiting the following partners:

Tier-1 Resellers: Distributors and value-added partners (VAPs) are partners who purchase products directly from Huawei and receive support directly.

Tier-2 Resellers: Platinum, gold and silver partners, and recognized partners add market capabilities and influence in their specific regional/industry markets.

“The channel is a key component to Huawei Enterprise’s business growth strategy, and we are approaching partners with a Win-Win model, creating business opportunities for our partners while maximizing value for end customers,” said Robert Yang, President of Channel Sales Department, Huawei Enterprise. “As we grow our business, our broad and comprehensive product portfolio, backed by our extensive R&D expertise, provides our partners with huge opportunities for business growth.”

Industry’s most comprehensive ICT training and certification program

In parallel with its development in the Enterprise market, Huawei has launched the industry’s most comprehensive ICT training and certification program. The Huawei Enterprise Training and Certification Program draws on Huawei’s more than 20 years of experience in developing ICT talent in more than 160 countries around the world. It is the only program of its kind that covers all ICT technical fields, and Huawei Enterprise has designed and positioned the program so that it will eventually become the leading ICT technical qualification.

Huawei Enterprise has quickly assumed a leadership position in the ICT industry, and this effort will help establish training and certification standards for the entire industry to facilitate its growth in the future. The company aims to certify 300,000 professionals by 2015. Huawei will also be recruiting partners to become Huawei Authorized Learning Partners (HALP).

In 2011, Huawei Enterprise’s global sales contracts totaled US$3.8 billion, up from US$2 billion in 2010. Established in 2011, Huawei Enterprise has capitalized on Huawei’s overall strength as one of the world’s leading ICT companies in IP and mobile and fixed networks with an international presence in over 140 countries and longstanding investments in R&D, for its continued growth in the market.

Huawei Enterprise at CeBIT 2012 – Press Conference – Andreas Neuherz Discusses New Products [HuaweiEnterprise YouTube channel, March 12, 2012]

Huawei Enterprise Bolsters Comprehensive Portfolio with New Enterprise Network and Server Products [Huawei Enterprise press release, March 7, 2012]

Switches, access routers, WLAN products and servers combine customer-centric innovation with latest ICT technologies

Huawei, a leading global information and communications technology (ICT) solutions provider, today announced the launch of multiple enterprise products at CeBIT 2012, including S9700 series high-end switches (3 models), S5700-LI series mid-range switches (8 models), AR200/150 series enterprise access routers (7 models), WLAN products (7 models of ACs and APs), Open Service Platform (OSP) forum and TecalTM V2 servers (6 models) that are supported by Intel® Xeon® E5 processors. Based on its customer-centric approach to innovation, these new products demonstrate Huawei’s continual efforts to meet the ever-changing ICT needs of global enterprises, providing customers with a better way to do business.

Customer-centric innovation is at the core of everything we do at Huawei Enterprise,” said David He, President of Marketing, Huawei Enterprise. “When it comes to designing hardware solutions, we approach innovation from the viewpoint of our customers, examining what their specific needs are in terms of features and operability. Our new WLAN products, switches, routers and servers embody this focus on the customer and we are confident that our enhanced product portfolio will set new industry standards.”

Switches, access routers and WLAN products that promote the evolution of “10G Cloud Campus”, “Enterprise Branches” and “Enterprise Mobility”

The S9700/S5700-LI series switches supplement Huawei’s current campus network product family. Among these new products, the S9700 provides a 320 Gbps per slot switching capacity and the highest 10GE/40GE port density in the industry to cope with the emerging high-definition video services and fast-developing “10G cloud campus”. In addition, the S5700-LI follows an energy-conservation design principle, adopting an innovative port sleeping, hibernate and awakening technology to reduce the total power consumption by over 40%.

Here’s Huawei’s new advanced router for enterprise networks. This is the type of router retail stores, mid-sized companies etc can buy.

WiFi technology is promoting the evolution of enterprise networks to integrated wired/wireless networks, and enterprises have an urgent need for a unified network management platform to manage wired, wireless, and IT devices. Huawei eSight enterprise network management software will help enterprises manage and maintain their network devices on a unified basis and improve network service quality. The 7 models of AR200/150 enterprise access routers offer various industry-leading wireless network solutions for customers to choose from. The AR G3 routers, based on industry-leading third generation architecture, are supported by multi-core CPUs and non-blocking switching network and integrate voice, data, and security services on one device. This all-in-one design extends cloud-based services to enterprise branch networks, while reducing customer’s investment by 30%. In addition, the AR G3 routers are based on the Open Service Platform (OSP), allowing partners and end customers to customize based on their needs and requirements.

Mobile office technology is changing how people work. The explosive increase in WiFi-supported smartphones, tablet computers, and laptops, and the increase in WiFi hotspots all contribute an ever-growing demand for mobile access. However, the current radio technology hinders development of mobile office. When an AP has a certain number of users connected, the bandwidth allocated to each user decreases dramatically. The WLAN products Huawei launched today are the only WLAN devices that provide fine-grained QoS control based on user groups. This mechanism provides differentiated services for each WiFi user. Enterprises and WiFi service providers can use flexible QoS policies to guarantee QoS for high-priority users.

These new products launched today provide more flexible choices for enterprises to keep pace with the fast development of cloud computing, WiFi, and smart terminal technologies in the “10G cloud campus” and “enterprise mobility” era.

Liu Shaowei, President of Huawei Enterprise network product line, said: “Huawei will continuously increase investment in the enterprise network market and devote our efforts to providing competitive products and solutions though constant innovation.”

Intel® Xeon® E5 Processor Powered TecalTM V2 Servers

Huawei’s new TecalTM V2 servers include rack mount server RH2288 V2, high-performance blade server BH622 V2 (for E6000), XH620 V2 and XH621 V2 nodes (for high-density datacenter server X6000), DH620 V2 and DH621 V2 nodes (for green and power efficient cabinet server X8000), all of which focus on applications for data centers and enterprises. These servers use the newest Intel® Xeon® E5 CPUs. These servers bring better performance, larger storage capacity and better virtualization usage, which will help internet and enterprise customers to accelerate their applications, and will also greatly increase server efficiency. Huawei helps customers to accelerate applications such as virtualization, database and big data application by providing hardware and software acceleration solutions. With an overall-considered system level design and well chosen components for power consumption control, they will help customers to achieve commercial success.

Huawei servers achieved more than 30 world records in SPEC (Standard Performance Evaluation Corporation) tests due to its continuous innovations. By adhering to the concepts of green and energy-savings, Huawei TecalTM servers received an ROHS certificate. Through the highly efficient use of raw materials, TecalTM servers achieved compliance for environmental protection across its manufacturing, product usage and treatment processes. By leveraging its power saving expertise, Huawei’s servers are able to save 5% to 10% of energy compared to similar products on the market, which helps significantly reduce a customer’s operation expenses.

“TecalTM servers have witnessed outstanding growth in the past three years. With a wide range of products including rack servers, blade servers, high density and scalability data center servers, Huawei servers are used by top ISPs and other well-known enterprises all over the world. We have also been continuously developing and launching competitive products and solutions to accelerate applications by innovation,” said Chen Shijun, General Manager of Huawei Server Product & Storage Domain.

Huawei Aggressive as Hell in Chasing New Partners [CRN (Connecting The Australian Channel), March 9, 2012]

Huawei this week confirmed more information about its expanding global enterprise channel as it seeks to burrow further into territory dominated by Cisco, HP and other vendors with monster worldwide channel programs.

The broad channel push comes on the heels of a US channel program Huawei launched last year. The global Enterprise Business Group also was formed in 2011 following a restructuring of Huawei Technologies Co. Ltd., the Shenzhen, China-based parent company.

Huawei executives told CRN at the time the company’s goal is to do 100 percent of enterprise sales in the US through channel partners and that “phase one” of the program includes Huawei’s Ethernet switches, routers and video telepresence products made available through US-based solution providers. In recent months, Huawei also has continued to recruit Western-based channel management talent, including former 3Com and HP executive Alex Dobson, now Huawei’s vice president of sales, U.S. Enterprise Group.

Now comes the global program, which Huawei unveiled this week at the CeBIT conference in Germany and which includes several program levels.

Tier-1 Resellers are Huawei distributors and VARs that purchase products directly from Huawei and receive support from Huawei.

Tier-2 Resellers, the group in which Huawei includes its Silver, Gold and Platinum-level partners, add market capabilities and are described by Huawei as “influential” in their specific regions and industry segments.

Huawei also is adding a training and certification specific to information and communications technology (ICT), through which it hopes to certify 300,000 professionals by 2015. It also plans to recruit partners to become Huawei Authorised Learning Partners.

William Xu, senior vice president of Huawei and CEO of Huawei Enterprise Business Group, said that a healthy partner ecosystem is a high priority for Huawei’s international expansion.

“Together with our channel partners, we intend to lead the industry with a dual devotion to customer-centric innovation and service, while tapping into Huawei’s vast experience to help enterprise customers navigate the challenges and opportunities in today’s ICT era,” Xu said in a statement.

According to Huawei Enterprise, it did $US3.8 billion ($A3.5 billion) in sales contracts in 2011, up from $2 billion in 2010. Industry sources peg Huawei’s global revenue at about $35 billion.

Several US-based solution providers contacted by CRN said they’d been approached by Huawei and were at least intrigued by the vendor.

“Say this for them: They’re aggressive as hell,” said the CEO of a longtime West Coast-based networking solution provider, who asked that his name not be used because his team is currently discussing the Huawei option. “It’s a good product and it’s priced reasonably, and it seems like they’re in this for the long haul. We’re going to look at the program pretty closely.”

Huawei has sought a stronger global enterprise presence for years but has seen growth stymied due to continued concerns over its alleged ties to the Chinese military – ties that Huawei has continued to deny.

The company has continued to broaden its enterprise product portfolio all the while. At CeBIT this week, it unveiled three high-end S9700 switches, eight S5700-LI midrange switches, seven AR200/150 enterprise access routers, seven WLAN access points, and six Tecal V2 servers supported by Intel Xeon E5 processors.

Huawei Launches Its U.S. Enterprise Business Through Channels [Huawei Enterprise press release, Oct 5, 2011]

Huawei, a leading global information and communications technology (ICT) solutions provider, today announced the formal launch of its Enterprise Business group in the United States. Huawei Enterprise, one of the three main business groups including Devices, and Telecoms Infrastructure, is well positioned to help fuel future growth – internationally and in the U.S. market.

Huawei’s enterprise business will deliver its broad product portfolio and solutions to channel partners (VARs, distributors, system integrators and carriers as a channels). Through our partners, Huawei is addressing the broader enterprise market, while Huawei and its channel partners will also focus on vertical segments. Solutions will include campus networks, branch access, IP backbone, data center and video conferencing.

“Huawei is uniquely positioned to combine our growing device expertise and market presence with our traditional telecommunications infrastructure products and services solutions with emerging leadership in open-application-based cloud computing and mass storage solutions”, said Karen Yu, President of Huawei’s Enterprise business in the U.S. “Success in our Enterprise business will focus on nurturing an open, interoperable and partner-based ecosystem to ensure long-term and maximum value for our channel partners and their enterprise customers.”

Three key products are the focus of the initial launch of the U.S. enterprise business: next-generation teleconferencing, environmentally-friendly switches and enterprise-class routers.

“As we transition towards the next phase of “consumerization of IT” to deliver enterprise-grade networking and communication solutions, it’s imperative that vendors develop expertise in mobility, cloud, video and unified communications, and other intelligent network infrastructures in addition to traditional data and voice networking capabilities”, said Rohit Mehra, Director, Enterprise Communications Infrastructure, IDC.

Huawei Channel Partner’s will reap the benefits of being united with a leading global technology provider who is truly committed to our channel partners’ long-term growth, and who has a strong local platform to support the business.

Please visit us at Booth #517 for more information about Huawei’s Enterprise Business Group, speak with our channel team and see demonstrations of the products that are part of the U.S. launch.

Standards-based adaptive layouts in Windows 8 (and IE10)

Windows 8 Consumer Preview: Product Demo [on WindowsVideos YouTube channel, Feb 28, 2012]

Jensen Harris from Windows User Experience gives a demo of the Windows 8 Consumer Preview.

With Windows 8 (and IE10) Microsoft is carrying out a future-proof web platform strategy as well. Below I’ve collected the standards-based adaptive layout technologies (as the most critical ones from a scaling point of view) implemented by the company for the current Windows 8 Consumer Preview released on Feb 29, 2012.

Windows 8 Consumer Preview: Making great Metro style apps [on WindowsVideos YouTube channel, Feb 29, 2012]
For this post watch at least the #2 Snap and Scale beautifully part between [2:42] and [3:20] !

Discover the common traits of great Metro style apps. For this post watch at least the #2 Snap and Scale beautifully part between [2:42] and [3:20] !

The corresponding W3C specifications are indicated along, namely:

Notes:

  1. For text layout CSS regions may be a better option than the multi-column in situations where a more varied page layout is called for, or where there is a possibility that the inline content of an element could overflow the element.
  2. All of the layout constructs available in HTML are available for XAML developers as well. In this way developers in the C++ and the managed (C# etc.) worlds are having the exactly same capabilities, particularly from the point of view of adaptive layout technologies described here from web standards point of view.

Scaling to different screens [Building Windows 8 blog, March 22, 2012]

(more…)

James Whittaker’s Quality Software Crusade from Academia to Microsoft, then Google and now back to Microsoft

UpdatesWhy I joined Microsoft [published: March 21, 2012; written: March 13, 2012]
– James Whittaker ‏ @docjamesw 7:06 AM – 20 Mar 12 via web · Details

A web futurist is someone who hates the web as it is now and envisions a better future for it.

– Why I hate search [MSDN Blogs > JW on Tech , March 15, 2012]

We start from scratch each time. We search for things we’ve already found.

The problem with Internet search is that being stupid about it is profitable. The more ugly blue links you serve up, the more time users have to click on ads. Serve up bad results and the user must search again and this doubles the number of sponsored links you get paid for. Why be part of the solution when being part of the problem pays so damn well? It’s 2012 and we are still typing search queries into a text box. Now you know why, a ‘find engine’ swims in the shallow end of the profit pool. Is it any surprise that technology such as Siri came from a company that doesn’t specialize in search? (Where do you place an ad in a Siri use case?)

There’s no more reason to expect search breakthroughs from Google than there is to expect electric car batteries to be made by Exxon.

We can do better. We’ve been searching for over a decade. We know every place possible where the online equivalent of car keys are found. We know where our online pet is, always. We know so many things about the world that no longer need to be served up as search “results.” (Results indeed! If users ever wake up and divorce their search engine, the “results” page is likely to be exhibit A in the separation hearing.)

Search, my friends, is broken. Finding things has become secondary to monetizing the search process. Fixing this situation is not in the best interest of the incumbents. Which, actually, is all well and good because the fix will need a more web-wide effort anyway. The companies that own the data sources, the companies that ingest, store and conflate that data, the myriad small development shops that do interesting things with the data, the cleverness of the people who curate the data and the power of crowdsourced know-how need to come together and make search … better? No, not better, irrelevant.

Search is dead. The web doesn’t need it and neither do we.

– Now you see it, in 20 years you won’t [MSDN Blogs > JW on Tech , April 12, 2012]

Google’s Marissa Mayer gave a Flintstonian glimpse at what search might look like in 20 years including “predicting what restaurant you might like in a new city” and “connecting you with strangers based on common interests.” Things that take entire seconds today will take … entire seconds in 2032. Thankfully, for Mayer at least, violating Moore’s Law carries no actual criminal or civil penalties.

In a nutshell, what Mayer (and I assume Google) is proposing is that in twenty years Google and the web will still be standing between knowledge and its consumption. Google has 40 billion reasons to be patient regarding the future.

You want a prediction of the future? The trend of disappearing search will continue. The web will melt into the background and humans will progressively be removed from their labor intensive and frustrating present by automation. In five years the web is likely to be completely invisible. You will simply express your intent and the knowledge you seek will be yours. Users will be seamlessly routed to apps capable of fulfilling their intent. Apps won’t need to be installed by a user; they will be able to find opportunities to be useful all by themselves, matching their capabilities with a user’s intent. You need driving directions? Travel reservations? Takeout? Tickets to a show? Groceries? Tell your phone, it will spare you the ugly links. It will spare you the landing page. It will spare you the ads. It will simply give you what you asked for. This is already happening today, expect it to accelerate.

End of Updates

James Whittaker@docjamesw 8:03 PM – 29 Feb 12 via web · Details

I got my team today. Hmm…what shall I do with 300 developers? You won’t have to wait long to find out.

About JW on Tech [MSDN Blogs > JW on Tech > About James Whittaker, March 13, 2012]

James Whittaker is a technology executive with a career that spans academia, start-ups and top tech companies. He is known for being a creative and passionate leader and in technical contributions in testing, security and developer tools. He’s published dozens of peer reviewed papers, five books and has won best speaker awards at a number of international conferences. During his time at Google he led teams working on Chrome, Google Maps and Google+. He is currently at Microsoft reinventing the web [in a Partner Development Manager role as per LinkedIn, and as a web futurist at Microsoft according to his twitter account].

Want to read more? James wrote How to Break Software, How to Break Software Security (with Hugh Thompson), and How to Break Web Software (with Mike Andrews). While at Microsoft, James transformed many of his testing ideas into tools and techniques for developers and testers, and wrote the book Exploratory Software Testing [Sept 4, 2009]. His current book was written when he was a test engineering director at Google and is called How Google Tests Software (with Jason Arbon and Jeff Carollo) [Whittaker’s twitter: getting close to end of printing, otherwise April 8, 2012].

     

How Google Tests Software [Google Testing Blog, May 26, 2011]:
Part 1Part 2Part 3Interlude  – Part 4Part 5Part 6Q&APart 7

Large-scale Exploratory Testing: Let’s Take a Tour [SQEVideo, published on Oct 2, 2011]

STARWEST 2009, October 5-9, 2009: Manual testing is the best way to find the bugs most likely to bite users badly after a product ships. However, manual testing remains a very ad hoc, aimless process. At a number of companies across the globe, groups of test innovators gathered in think tank settings to create a better way to do manual testing–a way that is more prescriptive, repeatable, and capable of finding the highest quality bugs. The result is a new methodology for exploratory testing based on the concept of tours through the application under test. In short, tours represent a more purposeful way to plan and execute exploratory tests. James Whittaker describes the tourist metaphor for this novel approach and demonstrates tours taken by test teams from various companies including Microsoft and Google. He presents results from numerous projects where the tours were used in critical-path production environments. Learn about the collection of test tours, test cases, and bugs from these case studies and recommendations for using tours on your own products.

[James Whittaker’s Google+ post, Feb 13, 2012]

Signing off of Google+
This will be my last post on Google+. Anyone interested in my post-Google career can follow me on Twitter (@docjamesw).

[James Whittaker’s Google+ post, Feb 3, 2012]

There comes a time when all good things must end and my time at Google is one of them. This is not one of those “Google let me down” rants, nor is it a “I love this company, keep up the good work” farewell … just a realization that even as my perf scores and profile within the company has risen my ability to lead has diminished. It’s time to stop being part of a team changing the world and time to go lead one. Unfortunately, the place to do that is elsewhere. Today is my last day.

Keep in touch with me on Twitter @docjamesw. Or not.

James Whittaker interview [TCLGroupLimited, Dec 3, 2011]

James Whittaker, Engineering Director of Google interviews for TCL in November 2011. … [3:26] I think Google has a much more mature testing organization than probably almost anyone. In fact, I think, really at the top of the testing tool chain Microsoft and Google probably stand alone. [3:38] … [6:27] I think both companies still have that kind of aura about that net cool factor. [6:32] … [8:08] Traditional publishing is as dead as testing …

James Whittaker’s testing blog posts while with Google [Google Testing Blog, June 8, 2009 – Nov 15, 2011]

James Whittaker joins Google [Google Testing Blog, June 2, 2009]

By Patrick Copeland

I’m excited to announce that James Whittaker has joined us as our newest Test Director at Google.

James comes to us most recently from Microsoft. He has spent his career focusing on testing, building high quality products, and designing tools and process at the industrial scale. In the not so distant past, he was a professor of computer science at Florida Tech where he taught an entire software testing curriculum and issued computer science degrees with a minor in testing (something we need more schools to do). Following that , he started a consulting practice that spanned 33 countries. Apparently, fashion is not high on his list as he he has collected soccer jerseys from many of these countries and wears those during major tournaments. At Microsoft he wrote a popular blog,and in the near future you can expect him to startcontributing here.

He has trained thousands of testers worldwide. He’s also written set of books in the How to Break Softwareseries. They have won awards and achieved best seller status. His most recent book is on exploratory testing is coming out this summer. It is not a stretch to say that he is one of the most recognizable names in the industry and has had a deep impact on the field of testing. If you have a chance, strike up a conversation with James about the future of testing. His vision for what we’ll be doing and how our profession will change is interesting, compelling and not just a little bit scary.

Join me in welcoming James to Google!

James Whittaker’s testing blog posts while with Microsoft 1st time [posted between July 8, 2008  and May 21, 2009]

tour of the month: the exit-stage-right tour [MSDN Blogs > JW on Test, May 21, 2009]

All tours much eventually come to an end and thus it is with my tour with Microsoft. I have resigned my position and am leaving the company. It was a great ride.

But the tours will continue. My book Exploratory Software Testing: Tips, Tricks, Tours and Techniques to Guide Manual Testers is in press and will appear through Addison-Wesley sometime this summer. I am truly thankful for the many wonderful testers at Microsoft who contributed wisdom, thoughts and even case studies to the effort. Special thanks go to Nicole Haugen, Geoff Staneff, David Gorena Elizondo, Shawn Brown and Bola Agbonile. Microsoft is full of great testers and even here, these guys manage to stand out.

I imagine that I will not be long in setting up a new blog as I have very much enjoyed this experience and being the only tester in Developer Division’s top ten bloggers was quite an honor. For that I thank you.

In case you are interested in my landing place, I can imagine that one or two of the more popular testing blogs around town will be talking about it.

Wish me luck …

before we begin [MSDN Blogs > JW on Test, July 8, 2008]

For those of you familiar with my writing I plan to update some of my more dated work (history of testing, testing’s ten commandments, and so forth) and preview some of the information that I will be publishing in paper and book form in the future. Specifically, I now (finally) have enough notes to revise my tutorial on manual exploratory testing: How to Break Software and will be embarking on that effort soon. This blog is where I’ll solicit feedback and report on my progress.

For now, here’s an update on what’s happening, testing-wise, for me at Microsoft:

  • I am the Architect for Visual Studio Team System – Test Edition. That’s right, Microsoft is upping the ante in the test tools business and I find myself at the center of it. What can you expect? We’ll be shipping more than just modern replacements for tired old testing tools. We’ll be shipping tools to help testers to test: automated assistance for the manual tester; bug reporting that brings developers and testers together instead of driving them apart; and tools that make testers a far more central player in the software development process. I can’t wait!
  • I am the Chair of the Quality and Testing Experts Community at Microsoft. This is an internal community of the most senior testing and quality thought leaders in the company. We kicked off the community with record-breaking attendance (the most of any of Microsoft’s technical network communities) at our inaugural event this past spring where some of our longest-tenured testers shared a retrospective of the history of testing at Microsoft followed by my own predictions for the future of the discipline. It was a lively discussion and underscored the passion for testing that exists at this company. In this quarter’s meeting we’re doing communal deep dives into the testing-related work that is coming out of Microsoft Research. MSR, the division responsible for Virtual Earth and the Worldwide Telescope also builds test tools! I can’t wait to ship some of this stuff!
  • I am representing my division (DevDiv) on a joint project with Windows called aQuality Quest. Our quest is concerned with quality, specifically, what we need to do to ensure that our next generation of platforms and services are so reliable that users take quality for granted. Sounds like I took the blue pill, doesn’t it? Well, you won’t find us dancing around acting like our software is perfect. Anyone who has ever heard me speak (either before or after I joined Microsoft) has seen me break our apps with abandon. In this Quest, we’ll leave no stone unturned to get to the bottom of why our systems fail and what processes or technology can serve to correct the situation.

New hire into our group – James Whittaker [MSDN Blogs > Michael Howard’s Web Log, May 5, 2006]

I’m pleased to announce, actually I’m *thrilled* to announce, that James Whittaker has joined our group [SDL – Security Development Lifecycle]. James is a well-known author and speaker on software testing and security. He most recently worked as a professor of computer science at Florida Tech where he ran a huge software security research team. James created the “How to Break…” book series with Addison Wesley. He wrote How to Break Software [May 19, 2002], How to Break Software Security [May 19, 2003] and How to Break Web Software [Feb 12, 2006].

     

He’s also one of the folks behind the Holodeck testing tool.

He’s a cool guy, sharp as a tack, with a very dry sense of humor, so we should get along just fine! He’ll be a peer of mine, reporting to Steve Lipner [Trustworthy Computing Initiative chief], and is initially focused on our internal security and privacy training.ne of the folks behind the Holodecktesting tool.

As I’m sure most of you will agree, hiring good security people takes time, and hiring talent like James is rare indeed.

Welcome, James!
[Michael Howard is now the chief security officer for Microsoft as a so called Principal Cybersecurity Architect working with customers and partners. Before that he was a long-time member of the Security Development Lifecycle team, in fact a co-founder of that in 2001, the SDL being also closely related to the now 12 years old Trustworthy Computing Initiative by Microsoft. ]

GTAC 2008 Keynote Address: The Future of Testing by James Whittaker of Microsoft [GoogleTechTalks, published on Apr 7, 2009]

Presented by James Whittaker, Microsoft Corp. at the 3rd Annual Google Test Automation Conference (GTAC) held in Seattle, WA on October 23-24, 2008.

An Interview with James Whittaker [Dr.Dobb’s Journal, Sept 26, 2006]

Michael Hunter interviews James Whittaker, noted testing guru and author, to shed some light on his testing philosophy.

James Whittakeris, I dare say, one of the celebrities of the testing world. He was long a professor of computer science at the Florida Institute of Technology, where he became well-known for his efforts to find ways to make testing a teachable skill. He and his research group there created innovative testing technologies and tools, including the popular runtime fault injection tool Holodeck, and became highly skilled at breaking software security. James founded Security Innovation to productize his work, but recently he has left both that company and teaching to join Microsoft as a Security Architect, where he is working to integrate testing into the Security Development Lifecycle (SDL).

James wrote How To Break Software – one of my favorite books on testing, co-wrote How To Break Software Security (also very good) with Hugh Thompson, and co-wrote How To Break Web Software(haven’t read it yet) with Mike Andrews. James’ talks at Microsoft are always standing room only; this interview will give you a taste of why.

DDJ: What was your first introduction to testing? What did that leave you thinking about the act and/or concept of testing?

JW: I was in graduate school in a software engineering group studying high assurance software engineering methodologies (cleanroom to be specific) and the bloody dev group met at 7:30 on Saturday mornings! I missed the first three meetings (dude, in grad school the nerd act doesn’t happen that early on a weekend) so the professor put me in charge of the independent test team (which I discovered was just me). So that left me with the idea that testers get more sleep than devs but that we need it because we are woefully outnumbered.

And that perception remains, sans the sleep part.

DDJ: What has most surprised you as you have learned about testing/in your experiences with’ testing?

JW: The sheer number of people *passionate* about testing, particularly at Microsoft. It gives me a great deal of confidence in the future knowing that such skill and talent is being applied to the hardest problem the discipline has to offerwhich is quality.

DDJ: What is the most interesting bug you have seen?

JW: The most interesting bug is always the latest bug. Just today everyone in our group was surprised at an Inbox with thousands of recall status messages. Someone sent a mail from an alias of 1275 members, then recalled it. The recall then sent success/failure notices to EVERYONE on the alias. That’s 1275 x 1275 (about 1.6 million) emails! How’s that for exploiting a design flaw!

DDJ: How would you describe your testing philosophy?

JW: Eyes open, brain on, test! Or the longer explanation covered in How to Break Software. Thanks for the chance to plug one of my books!

DDJ: What do you see as the biggest challenge for testers/the test discipline for the next five years?

JW: There are a number of trends that testers are going to have to grapple with. The first is that software is getting better. The result of this is that bugs are going to become harder and harder to find and the weaker testers will be relegated to Darwinian insignificance. Keeping sharp, building skills and maintaining a cutting edge testing knowledge has never been more important.

The second is that software process is finally taking over. For years processes haven’t much affected the way software is built (which doesn’t say much for legacy processes). But here at Microsoft the SDL is revolutionizing the way software is constructed. Testers have to figure out their role in this process. We have to be there, working, at project initiation and play a key role in every single phase of the lifecycle. Testing is not a task for the latter stages of the ship cycle. Testers who realize this and customize their work accordingly will rise in prominence within their product group and be able to influence the growth of the SDL rather than be steamrolled by it.

[See my Table Of Contents post for more details about this interview series.]

“if Microsoft is so good at testing, why does your software suck?” [MSDN Blogs > JW on Test, Aug 11, 2008]

What a question! I only wish I could convey the waythat question is normally asked. The tone of voice is either partially apologetic (because many people remember that I was a major ask-er of that same question long before I became an ask-ee) or it’s condescending to the point that I find myself smiling as I fantasize about the ask-er’s computer blue-screening right before that crucial save. (Ok, so I took an extra hit of the kool-aid today. It was lime and I like lime.)

After 27 months on the inside I have a few insights. The first few are, I readily concede, downright defensive. But as I’ve come to experience firsthand, true nonetheless. The last one though is really at the heart of the matter: that, talent notwithstanding, testers at Microsoft do have some work to do.

I’m not going down the obvious path: that testing isn’t responsible for quality and to direct the question to a developer/designer/architect instead. (I hatethe phrase ‘you can’t test quality in,’ it’s a deflection of blame and as a tester, I take quality directly as my responsibility.)

But I am getting ahead of myself. I’ll take up that baton at the end of this post. Let’s begin with the defensive points:

  • Microsoft builds applications that are among the world’s most complex. No one is going to argue that Windows, SQL Server, Exchange and so forth aren’t complex and the fact that they are in such widespread use means that our biggest competitors are often our own prior versions. We end up doing what we call “brown field” development (as opposed to ‘green field’ or version 1 development) in that we are building on top of existing functionality. That means that testers have to deal with existing features, formats, protocols along with all the new functionality and integration scenarios that make it very difficult to build a big picture test plan that is actually do-able. Testing real end-to-end scenarios must share the stage with integration and compatibility tests. Legacy sucks and functionality is only part of it…as testers, we all know what is really making that field brown! Be careful where you step. Dealing with yesterday’s bugs keeps part of our attention away from today’s bugs.

(Aside: Have you heard that old CS creationist joke: “why did it take god only seven days to create the universe?” The answer: “No installed base.” There’s nothing to screw up, no existing users to piss off or prior functionality and crappy design decisions to tiptoe around. God got lucky, us…not so much.)

  • Our user-to-tester ratio sucks, leaving us hopelessly outnumbered. How many testers does it take to run the same number of test cases that the user base of, say, Microsoft Word can run in the first hour after it is released? The answer: far more than we have or could hire even if we could find enough qualified applicants. There are enough users to virtually ensure that every feature gets used in every way imaginable within the first hour (day, week, fortnight, month, pick any timescale you want and it’s still scary) after release. This is a lot of stress to put our testers under. It’s one thing to know you are testing software that is important. It’s quite another to know that your failure to do so well will be mercilessly exposed soon after release. Testing our software is hard, only the brave need apply.
  • On a related point, our installed base makes us a target. Our bugs affect so many people that they are newsworthy. There are a lot of people watching for us to fail. If David Beckham wears plaid with stripes to fetch his morning paper, it’s scandalous; if I wore my underpants on the outside of my jeans for a week few people would even notice (in their defense though, my fashion sense is obtuse enough that they could be readily forgiven for overlooking it). Becks is a successful man, but when it comes to the ‘bad with the good’ I’m betting he’s liking the good a whole lot more. You’re in good company David.

But none of that matters. We’ll take our installed base and our market position any day. No trades offered. But still, we always ready to improve. I think testers should step up and do a better job of testing quality in. That’s my fourth point.

  • Our testers don’t play a strong enough role in the design of our apps. We have this “problem” at Microsoft that we have a whole lot of wicked smart people. We have these creatures called Technical Fellows and Distinguished Engineers who have really big brains and use them to dream really big dreams. Then they take these big dreams of theirs and convince General Managers and VPs (in addition to being smart they are also articulate and passionate) that they should build this thing they dreamt about. Then another group of wicked smart people called Program Managers start designing the hell out of these dreams and Developers start developing the hell out of them and a few dozen geniuses later this thing has a life of its own and then someone asks ‘how are we going to test this thing’ and of course it’s A LITTLE LATE TO BE ASKING THAT QUESTION NOW ISN’T IT?

Smart people who dream big inspire me. Smart people who don’t understand testing and dream big scare the hell out of me. We need to do a better job of getting the word out. There’s another group of wicked smart people at Microsoft and we’re getting involved a wee bit late in the process. We’ve got things to say and contributions to make, not to mention posteriors to save. There’s a part of our job we aren’t doing as well as we should: pushing testing forward into the design and development process and educating the rest of the company on what quality means and how it is attained.

We can test quality in; we just have to start testing a lot sooner. That means that everyone from TF/DE through the entire pipeline needs to have test as part of their job. We have to show them how to do that. We have to educate these smart people about what quality means and take what we know about testing and apply it not only to just binaries/assemblies, but to designs, user stories, specs and every other artifact we generate. How can it be the case that what we know about quality doesn’t apply to these early stage artifacts? It does apply. We need to lead the way in applying it.

I think that ask-ers of the good-tester/crappy-software question would be surprised to learn exactly how we are doing this right now. Fortunately, you’ll get a chance because Tara Roth, one of the Directors of Test for Office is speaking at STAR West in November. Office has led the way in pushing testing forward and she’s enjoyed a spot as a leader of that effort. I think you’ll enjoy hearing what she has to say.

Test Talk with James Whittaker [Oct 3, 2011]

Test Talk with James Whittaker

James Whittaker is in software testing as long as he can remember. During his study he wrote his graduation paper about Model Based Testing. He made fame at Microsoft and recently he ´joined the enemy´ by going over to Google. His books “how to break software” are bestsellers and the presentation in which he is hacking websites live in front of the audience are fantastic. His last book about Exploratory Software Testing is released last year. I was in the opportunity to ask him the questions below.

1. Can you introduce yourself and explain how you already became a tester during college at the University of Tennessee-Knoxville, judging the name of your dissertation.
My name is James Whittaker and I am a Director of Engineering at Google. I own Test for a bunch of Google products including Chrome browser, Chrome operating system, Google Toolbar as well as some Search and Geo products and a bunch of back-end data center infrastructure applications. I also own Development of engineering tools including both developers and testing tools.

I got into test when I was a grad student. Mostly it was by default as my software engineering research team met on Saturday mornings and I had better things to do early Saturday than spend it with a bunch of coding nerds. My professor gave me two choices: get fired or be a tester. Neither he or I knew what a favor he did for me at the time. I really hit the ground running and did a lot of innovative work in model-based testing. In fact, I got my PhD two years before any of those developers. Testing was a great career move for me even back then.

2. How hard was it to change from a Microsoft employee towards a Google employee, and is testing very different at these two companies?
Not hard at all difficult. Microsoft was great preparation for Google. Culturally they are polar opposites with Microsoft being more top down whereas Google is more engineering driven. At Microsoft the high ratio of testers to developers is a case in point. The numbers of people on a project is made by execs and managers. At Google it is made by engineers and no engineer at Google believes a 1:1 ratio is necessary or even healthy. The fewer testers on a project means more involvement by developers for QA. I had a meeting yesterday with the development director for Chrome OS and the entire subject was what they could do to make our job easier. The director was genuinely concerned that his developers were engaging deeply enough on testing issues. A culture like that makes the 1:1 ratio irrelevant … everyone on the project is a tester.

3. I read somewhere that you are busy at Google with forging a future in which software just works. Is that possible, a world without software bugs?
Not in my lifetime. However we are getting closer. Even a few years ago I had to pull the battery on my smart phone every week or so. I’ve not even turned my current one off for 3 months and it works fine. Quality assurance for software is much like health care for humans. Humans will always get sick but with good prevention, good hygiene and regular maintenance our bodies do ok. We need to make testing like this: continuous and ongoing. One of the things that annoys me is the whole “push quality upstream” movement. Some people seem to believe that we can rig it so we just write perfect code. That’s like taking all your vitamins when you are a baby and then expecting a long healthy life. Obviously upfront debugging is good, but quality is an ongoing endeavor. It starts at the beginning and is a constant activity throughout the life of a product.

4. Patrick Copeland said that your vision on the future of testing is interesting, compelling and not just a little bit scary. Can you shortly tell us your vision, so we don’t get scared?
I am happy that it scares people and honored that it scares smart people like Patrick who thinks deeply on these matters. Too many people are dogmatic about testing. Some say “avoid rigor and do only exploratory testing” and they say it with a fervor that reminds me of religious fundamentalist who see only black and white. Others say the same of automation with the same amount of self righteousness. One thing I do know is that when you think your world view is the only view, there is a problem. People like this have stopped thinking about alternatives. They’ve stopped being open minded. They’ve definitely stopped being right.

I am also not going to stand in the middle and start every answer with ‘it depends.’ It turns out that there are some absolutes. There are some testing problems that can be driven to extinction with automation. There are some problems where exploratory testing is exactly the opposite of a good idea. I think it is smart to be problem-oriented and not solution-oriented. The latter is the proverbial hammer solution where every problem looks like a nail because you sell hammers for a living. I’ve laid out my full vision for software testing in my latest book but let me just say here that the part people find scary is that my vision requires far fewer testers than the world currently employs.

5. Your last book is about Exploratory Testing. Can you explain how taking the supermodel tour will improve our testing skills?
All the tours focus a tester’s attention. The idea is to test on purpose. Exploratory testing does not have to lack rigor and it does not have to encompass endless wandering hoping that you find a bug. It also should be about finding important bugs. I find myself endlessly annoyed by speakers who show bugs that no one would care about. Any exploratory method can find easy bugs; what about the hard ones?

Many of the tours focus on a general class of bug. The Supermodel Tour as a specific case focuses on presentation layer bugs. It asks you to first identify important properties of the UI and then choose paths that force those properties to change and then be displayed on the UI. We called it the Supermodel Tour to get the idea across that we are looking only skin-deep for bugs (only at the UI level). The tour gives both general guidance in terms of focusing on displayable properties and specific guidance about what part of the application should be visited during an exploratory session (the functions that allow you to change and then display those values). So you see that it requires some pre-work and planning but then allows for exploration once that planning is done. For example, in Maps we run the Supermodel Tour on our classification of landmarks. We make a list of all the landmarks (national parks, places of interest and so forth) in advance and explore the UI to find each location. We (actually Brendan Dhein) found a bug where Arlington National Cemetery was classified as a restaurant! It’s a subtle bug if you are just exploring. But if you are running the Supermodel Tour is jumps out at you. The idea is that a good tester can become a great tester with the right focus and by testing on purpose.

6. What will your next book be about?
I’m writing a book called How Google Test Chrome which details our testing process start to finish on Chrome OS. It’s a totally open kimono assessment of everything that we are going. Right, wrong, false starts, great ideas, cool innovation, new tools and every test artifact we generate from plans to test cases to open source automation. I am psyched about this as I don’t believe anyone has every fully documented and published a complete project before, particularly one of the complexity of an operating system.

I plan to include the browser too in this but as I have only written the first chapter on the test plan I do not want to over commit!

7. How is testing managed at Google? From one place or per country or per application or … ?
It’s divided by product lines or what we call “Focus Areas.” In my case I own the Client Focus Area. However since I am in a remote site I also have authority over all the work that goes on in Kirkland and Seattle Washington. I’m a busy boy but I like it that way. A single product would bore me.

It’s funny that on the Dev side each product has a Director in charge of it. Whereas I am the Director over many products. I have Test Managers over each product who have to interact with a Director on the dev side. So if you match us up one to one, you might have a Test Manager matching wits on a daily basis with Development Director three levels above them in rank. You talk about character building, this is the place for that. Google test managers are a breed apart. Cream of the crop.

8. Are you still collecting soccer jerseys? And if so, is there one you really want to add to your collection?
Yes and I cannot wait to wear them during the World Cup. By tradition I never wear anything else during that tournament (sorry for the visual). When people invite me to speak I often get them as gifts and I have dozens. I am hoping I get a Swiss one this trip (hint, hint) and I lost my Australian one (please don’t ask) and am looking for a replacement. But I have a lot of club jerseys too and will relish the chance to wear different colors. Send me a jersey and I’ll send you some signed books!

9. I hear you will giving a keynote at the Swiss Testing Day. Can you give us a sneak preview on what it will be about?
“Testing On Purpose” is the title. I am talking in far more depth about how we are testing Chrome at Google. I hope to see you there.

All that testing is getting in the way of quality by James Whittaker, Part One  [TCLGroupLimited, Dec 8, 2011]

TCL presents Google’s James Whittaker on “All that testing is getting in the way of quality”. PART ONE is starting with the early 2011 changes in the way Google is carrying out engineering work. This made Whittaker to rethink the role of testers fundamentally. … CAN TESTING GET CREDIT FOR SOFTWARE GETTING BETTER (which is definitely the case)? … WHY SOFTWARE IS BETTER? …IMMEDIATE COST OF LOW QUALITY (user is moving away) … POST_SHIP BUG FIXING (could fix in-place now, auto update) … SELF REPAIRING SOFTWARE (crash recovery) … GOODBY SERVER CONFIG (cloud deployment) … REDUCTION OF [platform] VARIATONS AND DEPENDENCIES (standards) … ELEGANT PROGRAMMING LANGUAGES (Java with automatic garbage collection, Python, Ruby, … don’t write big programs) … ERADICATION OF CERTAIN BUG SPECIES (extinction) … BETTER CODE MANAGEMENT (initial code quality by automating workflows … pre-submit checks …) … CONTINUOUS BUILD/INTEGRATION/RELEASE/TEST …

All that testing is getting in the way of quality by James Whittaker, Part Two [TCLGroupLimited, Dec 8, 2011]

TCL presents Google’s James Whittaker on “All that testing is getting in the way of quality”. PART TWO is starting with the observation that USER IS A BETTER TESTER THAN YOU ARE … leading to the conclusion that TESTERS COULD COMPLETELY BE REMOVED (as unnecessary go betweens) FROM THE INSIDES OF THE DEVELOPER-USER RELATIONSHIP.

A Brave New World of Testing? An Interview with Google’s James Whittaker by Forrest Shull [IEEE Software, March/April 2012 pp. 4-7]

… In their introduction, the guest editors have compiled a list of questions related to what our future, cloud-intensive world is going to look like—many of which I’ve heard myself from colleagues in government and commercial positions. The one that I hear most often is this: How should organizations leverage the power of this approach to improve testing and quality assurance of software? To get an answer, I turned to James Whittaker, an engineering director at Google, which has been at the forefront of leveraging the cloud. James is a noted expert and author on software testing, whose team has been managing Google’s cloud computing testing. Some excerpts of our conversation:

What is it like right now, looking across cloud computing testing at Google? It sounds like a pretty major undertaking.

In one of your previous interviews, I came across a statement of yours that has become one of my favorite thought-provoking quotes. You said, “Anyone who says that testing is getting harder is doing it wrong.” Could you expand on this a bit?

In the cloud, all the machines automatically work together; there’s monitoring software available, and one test case will run anywhere. There’s not even a test lab. There’s just a section of the datacenter that works for you from a testing point of view. You put a test case there and it runs. And all of the different scheduling software that any datacenter uses to schedule tasks can be used to schedule tests. So, a lot of the stuff that we used to have to write and customize for our test labs, we just don’t need anymore.

The other thing the cloud has done is brought us closer to our users. Think of Google Maps: it’s really impossible to hire a group of testers to exhaustively test it. It’s literally a piece of software of planetary proportions. If there’s a bug in my address on Google Maps, I’m likely to be the only one who will find it. But the cloud also enables us to reach out to users who are early adopters to get better and richer bug feedback than we were ever able to do back in the client-server days, when once software got to the field it was very difficult to update and instrument. Now, it’s easy to update a datacenter, it’s easy to instrument a datacenter. If a customer finds a bug, it’s easy for them to tell us about it, and it’s easy for us to fix it and push that fix to all our users, by just refreshing a browser.

So the cloud really does change things. It’s a different model of development; it’s a different model of testing; it’s a different model of usage.

Regarding testers and the skill sets that they’ve traditionally been applying on the job, does the same skill set still apply? Or are people being asked to develop new skills to take advantage of all these cloud features?

So, if I can paraphrase what you’ve been saying, the cloud is changing the whole underlying economics of software development and software testing. It’s easier and quicker for a company to try something, push it out to users, hear from the users what the problems are, and fix them, than it is to follow the traditional path of getting the requirements right up front, then getting the architecture right and nailed down, then getting the coding done well ….

Absolutely. By the time you do all that stuff, you’re too late. Your competitor’s beaten you to the market. On the cloud, you can really release and iterate—that’s much more the development model of modern times.

But you have to be careful: Google’s not pushing software out to its users saying, “Hey, is this any good? We’re not sure!” There are a lot of intermediate steps. We have an internal process we call dogfooding, as in, if you’re trying to sell dog food, you should eat your own product first to make sure it’s okay. All our software is used internally first by Googlers before we push it out to the world. If you look at something like Google+, which we released last year, we used that internally among Googlers for many months before we released it. In that process of dogfooding Google+, we found far more bugs and far richer bugs than the test team associated with Google+.

The points you’re making, about having representative users from the beginning who are able to use the product and help mature it, represents a much bigger paradigm shift than I had originally realized.

To me, that is just one of the most crucial things that companies absolutely have to get good at. In the past, if you found a bug in, say, your browser, you didn’t know how to report it. You’d have to find some bug-reporting page on the vendor’s site, and it would ask you what operating system you were using and what version of the browser you were using, and what other plug-ins you had installed…. But the machine knows all that stuff! So the idea is that once you crash, or once a user finds a bug, you just grab that machine state and send it back to the vendor so that they can understand the state the user was in exactly.

This seems like a very concrete model to use for functional testing. But does the same paradigm work if I’m worried about things like reliability, performance, or throughput?

Or better yet, security, privacy, and so on. I agree with you completely. I think the idea of paying top dollar for engineers to do functional testing really is an artifact of the 1990s and 2000s, and shouldn’t be something that companies invest in heavily in the future. But things like security, privacy, and performance are very technical in nature. You don’t do security testing without understanding a lot about protocols, machine states, or how the Web works; a lot of a priori knowledge is required. You can’t replace that. So when I give advice to functional testers who say that I’m predicting the end of their job, specialization is one of the things I recommend. Specialization is crucially important.

How does the simplistic testing model that we all learned in school—where you go first through unit testing, then integration testing, then system testing—adapt to the new paradigm?

We do integration testing, but we call it something different. People always say that Google just likes to change the names of things, but we did this one on purpose. We don’t have to integrate it from environment to environment, but we do have to integrate it across developers. So developer A writes one module, developer B writes another module; to us, integration testing hits both developer A’s anzsoftware that you simply do not have to run on the cloud: any sort of configuration test, and any sort of load testing, just isn’t necessary in this new modern environment. Load is taken care of for you; if it slows down, new cells in the datacenter are spun off automatically.

When you hire new testers for your teams at Google, is there something in particular that you’re looking for? You mentioned specialization as being important, but is there anything else that makes a good cloud tester versus just a good tester?

For folks who are trying to move legacy systems onto the cloud, does their development and testing process look a lot different from what they’d use when trying to do something more greenfield?

Where are things going in the future? Will abstractions allow developers and testers to worry about even fewer issues over time, or will there be new things that we do need to worry about as more and more people go on the cloud?

There are definitely some new things that we’ll need to worry about. First and foremost, connecting to customers is going to be really important. As much as we have the server side of it down (instead of having a massively complex server, we just have this cloud that takes care of itself), there’s still a lot of variation on the device/user side. If you look at the number of Android devices that are out there, and the number of operating systems and apps that people have configured onto them, that is still a hard testing problem.

The cloud actually makes that easier, too. Crowdsourcing companies are now connecting certain specific people with specific devices to people who are writing apps on those devices. So the idea of leveraging the crowd through the cloud is definitely something that hasn’t been done before, and is a new phenomenon that we’re watching really carefully here.

One thing is for sure, we’re never going to settle on a single platform. Humankind doesn’t seem to be capable of doing that, and I don’t think it would be a good thing to eliminate competition among platforms. The Linux/Windows competition has always been healthy, and the same thing is happening in the mobile space now. So we’re always going to have to develop for multiple platforms, and those platform owners are going to want to innovate as quickly as they can and they’re not always going to be checking with you or each other on those innovations, so the developers are just going to have to be on their toes.

Learn More

My conversation with James touched on many more issues than I could note here. If you’re interested in hearing more of the conversation we had, which ranged over additional issues such as cloud testing tools and handling privacy and robustness, then check out our half-hour audio interview at http://doi.ieeecomputersociety.org/10.1109/MS.2012.23.

More than anything else, my conversation with James made me aware again of the significant changes to the way we do business that accompany the cloud, and the new skills that are becoming important. Perhaps the best summary was James’ comments that “People really need to take the cloud seriously and rethink testing from the ground up. There are a lot of sacred cows in testing that just go away with the transition to the cloud. Keeping an open mind and taking advantage of the efficiencies of the cloud are going to be really important.” I certainly hope the remainder of this special issue on cloud computing will help give you useful food for thought in doing so.

Why I left Google [MSDN Blogs > JW on Tech, March 13, 2012]

Ok, I relent. Everyone wants to know why I left and answering individually isn’t scaling so here it is, laid out in its long form. Read a little (I get to the punch line in the 3rdparagraph) or read it all. But a warning in advance: there is no drama here, no tell-all, no former colleagues bashed and nothing more than you couldn’t already surmise from what’s happening in the press these days surrounding Google and its attitudes toward user privacy and software developers. This is simply a more personal telling.

It wasn’t an easy decision to leave Google. During my time there I became fairly passionate about the company. I keynoted four Google Developer Day events, two Google Test Automation Conferences and was a prolific contributor to the Google testing blog. Recruiters often asked me to help sell high priority candidates on the company. No one had to ask me twice to promote Google and no one was more surprised than me when I could no longer do so. In fact, my last three months working for Google was a whirlwind of desperation, trying in vain to get my passion back.

The Google I was passionate about was a technology company that empowered its employees to innovate. The Google I left was an advertising company with a single corporate-mandated focus.

Technically I suppose Google has always been an advertising company, but for the better part of the last three years, it didn’t feel like one. Google was an ad company only in the sense that a good TV show is an ad company: having great content attracts advertisers.

Under Eric Schmidt ads were always in the background. Google was run like an innovation factory, empowering employees to be entrepreneurial through founder’s awards, peer bonuses and 20% time. Our advertising revenue gave us the headroom to think, innovate and create. Forums like App Engine, Google Labs and open source served as staging grounds for our inventions. The fact that all this was paid for by a cash machine stuffed full of advertising loot was lost on most of us. Maybe the engineers who actually worked on ads felt it, but the rest of us were convinced that Google was a technology company first and foremost; a company that hired smart people and placed a big bet on their ability to innovate.

From this innovation machine came strategically important products like Gmail and Chrome, products that were the result of entrepreneurship at the lowest levels of the company. Of course, such runaway innovative spirit creates some duds, and Google has had their share of those, but Google has always known how to fail fast and learn from it.

In such an environment you don’t have to be part of some executive’s inner circle to succeed. You don’t have to get lucky and land on a sexy project to have a great career. Anyone with ideas or the skills to contribute could get involved. I had any number of opportunities to leave Google during this period, but it was hard to imagine a better place to work.

But that was then, as the saying goes, and this is now.

It turns out that there was one place where the Google innovation machine faltered and that one place mattered a lot: competing with Facebook. Informal efforts produced a couple of antisocial dogs in Wave and Buzz. Orkut never caught on outside Brazil. Like the proverbial hare confident enough in its lead to risk a brief nap, Google awoke from its social dreaming to find its front runner status in ads threatened.

Google could still put ads in front of more people than Facebook, but Facebook knows so much more about those people. Advertisers and publishers cherish this kind of personal information, so much so that they are willing to put the Facebook brand before their own. Exhibit A: http://www.facebook.com/nike, a company with the power and clout of Nike putting their own brand afterFacebook’s? No company has ever done that for Google and Google took it personally.

Larry Page himself assumed command to right this wrong. Social became state-owned, a corporate mandate called Google+. It was an ominous name invoking the feeling that Google alone wasn’t enough. Search had to be social. Android had to be social. You Tube, once joyous in their independence, had to be … well, you get the point. Even worse was that innovation had to be social. Ideas that failed to put Google+ at the center of the universe were a distraction.

Suddenly, 20% meant half-assed. Google Labs was shut down. App Engine fees were raised. APIs that had been free for years were deprecated or provided for a fee.As the trappings of entrepreneurship were dismantled, derisive talk of the “old Google” and its feeble attempts at competing with Facebook surfaced to justify a “new Google” that promised “more wood behind fewer arrows.”

The days of old Google hiring smart people and empowering them to invent the future was gone. The new Google knew beyond doubt what the future should look like. Employees had gotten it wrong and corporate intervention would set it right again.

Officially, Google declared that “sharing is broken on the web” and nothing but the full force of our collective minds around Google+ could fix it. You have to admire a company willing to sacrifice sacred cows and rally its talent behind a threat to its business. Had Google been right, the effort would have been heroic and clearly many of us wanted to be part of that outcome. I bought into it. I worked on Google+ as a development director and shipped a bunch of code. But the world never changed; sharing never changed. It’s arguable that we made Facebook better, but all I had to show for it was higher review scores.

As it turned out, sharing was not broken. Sharing was working fine and dandy, Google just wasn’t part of it. People were sharing all around us and seemed quite happy. A user exodus from Facebook never materialized. I couldn’t even get my own teenage daughter to look at Google+ twice, “social isn’t a product,” she told me after I gave her a demo, “social is peopleand the people are on Facebook.” Google was the rich kid who, after having discovered he wasn’t invited to the party, built his own party in retaliation. The fact that no one came to Google’s party became the elephant in the room.

Google+ and me, we were simply never meant to be. Truth is I’ve never been much on advertising. I don’t click on ads. When Gmail displays ads based on things I type into my email message it creeps me out. I don’t want my search results to contain the rants of Google+ posters (or Facebook’s or Twitter’s for that matter). When I search for “London pub walks” I want better than the sponsored suggestion to “Buy a London pub walk at Wal-Mart.”

The old Google made a fortune on ads because they had good content. It was like TV used to be: make the best show and you get the most ad revenue from commercials. The new Google seems more focused on the commercials themselves.

Perhaps Google is right. Perhaps the future lies in learning as much about people’s personal lives as possible. Perhaps Google is a better judge of when I should call my mom and that my life would be better if I shopped that Nordstrom sale. Perhaps if they nag me enough about all that open time on my calendar I’ll work out more often. Perhaps if they offer an ad for a divorce lawyer because I am writing an email about my 14 year old son breaking up with his girlfriend I’ll appreciate that ad enough to end my own marriage. Or perhaps I’ll figure all this stuff out on my own.

The old Google was a great place to work. The new one?

MWC 2012: Fuzhou Rockchip Electronics

Follow-upCore post: China’s HW engineering lead: The Rockchip RK292 series (RK2928 and RK2926) example [Oct 27, 2012]

Exclusive : ST Ericsson, Rockchip To Join Windows 8 For ARM Club In 2013 [Feb 29, 2012]

Rockchip RK30xx ARM Cortex-A9 announced at Mobile World Congress 2012 [Charbax, Feb 29, 2012]

Rockchip [a fabless SoC company with 400+ employees now] and ARM have announced the new [40nm LP] Rockchip RK30 series at Mobile World Congress. Expect full mass production to happen around May 2012, with samples being shipped around right now. Check back on my blog in the coming weeks and months for many affordable tablets, smartphones and Set-top-boxes featuring this new up to 1.4Ghz Dual-core 40nm Rockchip processor. The SoC price is just $15 for this dual-core ARM Cortex-A9 system!

Rockchip Licenses a Wide Range of ARM IP for Turnkey Solution Targeting Mass Market, Cost-Effective Android Tablets [Rockchip press release, Feb 27, 2012]

Rockchip, a leading Chinese fabless semiconductor company and mobile Internet System-on-Chip (SoC) solution provider, today announced its next generation RK30xx platform, targeting the mass market, cost-effective Android tablets. The new platform is based on wide range of ARM® Intellectual Property (IP) that Rockchip has licensed, including dual-core ARM Cortex™-A9 MPCore™ processors, ARM quad-core Mali™-400 MP Graphics Processing Units (GPUs) and an ARM Artisan® Physical IP Process Optimization Pack (POP) for the Cortex-A9 processor. The RK30xx platform is a turnkey solution that reduces design complexity and enables faster time-to-market for Android tablet manufacturers, enabling them to address fast changing consumer demands.

The combination of Rockchip’s market-leading design experience for mobile Internet devices and high-performance, energy-efficient processor and GPU technologies from ARM has resulted in a platform that delivers captivating 3D gaming experiences and fluent HD video playback, as well featuring a rich set of memory interfaces and peripherals.

“The tablet market is growing rapidly, and putting greater demands on semiconductor companies to deliver cost-effective solutions that can sustain an ever-increasing level of graphics, video and gaming performance, while still being energy-efficient,” said Mr. Feng Chen, Chief Marketing Officer, Rockchip. “The partnership enables us to use proven mobile Internet technologies from ARM and provide a high-performance, low-cost and easy-to-design platform. This turnkey solution is ideal for customers to quickly adopt for their Android-based tablet devices. The combination of the ARM Cortex-A9 processor and the POP has enabled the highest performance with the lowest power in the fastest time possible. Rockchip has been able to deliver a highly efficient processor implementation on a 40nm LP process.”

“ARM is committed to providing advanced processor, GPU and physical IP technologies to our Partners. This enables them to innovate for complex, smart system applications, such as mobile Internet,” said Mike Inglis, executive vice president and general manager, processor division, ARM. “We are pleased that Rockchip, whose solutions are already being used in many mobile Internet products, has chosen a range of ARM IP for their innovative, next generation RK30xx platform. We look forward to their continued success in the Android tablet market.”

The Rockchip RK30xx platform features:

Dual-core ARM Cortex-A9 processor with up to 1.4GHz speed, implemented with Artisan Processor Optimization Pack (POP)
• Quad-core ARM Mali-400 MP GPU, supporting OpenGL ES 1.1/2.0 and OpenVG 1.1
• Full memory support, including DDRIII, DDRII, and LPDDRII
• High performance dedicated 2D processor
• 1080P multi-format video decoder
• 1080P video encoding for H.264 and vp8
• Stereoscopic 3D H.264 MVC video codec
• Embedded HDMI 1.4a, supporting 3D display
• Embedded 60bit/s ECC, supporting MLC NAND, E-MMC, i-NAND and booting
• Support of dual panel display and dual camera

Availability

Samples of the Rockchip RK30xx platform will be available in March 2012.

Rockchip Tablets – ARM at CES 2012 [ARMflix, Jan 12, 2012]

Rockchip their new ARM Powered tablets at the Consumer Electronics Show 2012, including a tablet that streams live TV, Android-based tablets, 4G LTE tablets, dual-input tablets, E-Home 4G connected solutions, and multi-screen tablet-TV sharing.

Review On The Major Tablet Chips In Shenzhen Market [M.I.C. Digi, March 27, 2011]

Rockchip RK2818: Rockchip RK2818 is an ARM9-based core. It is made by the 65nm process [Chartered Semiconductor Manufacturing – now part of Global Foundries] and has a frequency of 624MHz, beginning to support DDR2 memory. So the performance of RK2818 is fair. The drawback is that the 3D display is realized by the CPU instead of an seperate graphics core, so it can only support the 720P video when doing its upmost. Tablets with RK2818 came into season around last October. The current price of RK2818 tablets with the lowest configuration has dropped to 500 yuan.

Rockchip RK2918: RK2918 is the next-generation product of RK2818. Its clock can reach 1.2GHz. With the 55nm process [TSMC], Cortex-A8 core, and the separate graphics core [GC800 from Vivante with 60 million triangles/s], RK2918 is attractive. But there haven’t been RK2918 tablets large quantities on the market. …

Photo: people who know better?  On the MID Tablet market trends clash

Shenzhen Wabook shows $93 Rockchip RK2918 Laptop [Charbax, March 7, 2012]

The Wabook EPC1029 [shown on Cebit 2012 in Germany], with a 10.1″ 1024×600, runs on the Rockchip RK2918 ARM Cortex-A8, 3 USB Host ports, it can run Android 4.0, the price for bulk (1000+) orders is $93. I want to see how smooth Chrome for Android runs on this Laptop. Check back soon, I will try to get them to show the performance of Chrome for Android on ICS on this RK2918 laptop as soon as possible.

Fan of Android 4.0, Ice Cream Sandwich? See What Rockchip is Serving up in Las Vegas [Rockchip press release, Jan 6, 2012]

Chinese Semiconductor Company will feature
4G Tablets with Adobe® Flash® 11 at 2012 CES

You recognize Android phones, tablets, TVs, and home phone systems, but do you recognize one of the worldwide leaders behind much of this technology?

Chinese-based Fuzhou Rockchip Electronics Co., Ltd, Asia’s leading developer of fabless semiconductors with an emphasis on Mobile Internet Platforms, will release the RK2918 chip for Google’s Android 4.0 Operating System – known as the Ice Cream Sandwichat the 2012 Consumer Electronics Show (CES) in Las Vegas, January 10-13.

Rockchip will feature phones and tablets utilizing their technology and Android 4.0 at their booth – including some that incorporate Adobe® Flash® 11, not currently standard with 4.0 technology.

With 80 percent market share penetration in China– a figure that would make them a virtual behemoth here in North America – Rockchip’s product can be found in dozens of famous name brand products including Samsung, Philips, Sony, Toshiba and Archos. And with consumer demand for the Ice Cream Sandwich poised to explode across all products and platforms on six continents, Europe and the Americas are `logical targets for the Chinese company.

“The global environment is right for our Android 4.0 product, and as a company, we are in precisely the right position to play a major role in satisfying a healthy portion of that demand,” said Chen Feng, Vice President of Rockchip. “We are looking at CES as an opportunity to introduce our latest technology to the trade, and the public, as we build towards more solidly establishing our name outside of the Chinese market.”

The world’s leading provider of microchips for the entire MP3/MP4 market, exclusive of Apple®, Rockchip will showcase at CES the largest selection of tablets that utilize their technology. “We think we will have between 30 and 40 tablets at Vegas,” said Feng. “We’ve adding new products every day, so even now, as we prepare to leave for CES, we’re not sure what that final number will be!”

Not yet familiar with Rockchip here in North America?

That’s not altogether surprising; but as this rapidly growing company continues to make its mark on a burgeoning industry, you can rest assured of one thing …

You will be soon!

First ICS Tablet in Hand! Android 4.0 Tablet Powered by RK2918 Goes on Sale! [Rockchip press release, Jan 11, 2012]

This week, the first Android 4.0 tablet in the world will go on sale, which is powered by Rockchip RK2918 chipsand manufactured by numbers of brand companies in China. For those who have got an Android 2.3 tablet in hand, the device can get a free to the newly released version at the same time. Let’s get a big bite on the Ice Cream Sandwich!

This is really a big hit after we’ve seen videos showing ICS demos on tablets with RK2918 last week, on reports from several big tech websites.

Tablets like Newsmy K97, Window N90, Cube U9GT2 and Telecast T76 are on the list of first , and the ICS pre-installed products are available on local brand stores and online shops. U.S. and European markets also get access to RK2918 tablets manufactured by overseas ODMs.

“The OS will be continuously optimized for better compatibility and performance,” Rockchip announced, “to achieve the best experience on ICS”. And later we will see more brand companies updating their tablets with RK2918 solution.

The specific date of ICS release will be announced according to different brands, please pay attention to our latest report.

Newsmy K97

Download: http://www.newsmy.com/Page/Download_1.html;

http://220.168.57.227:1949/cunchu/20111216K97android4.0tiyanban.rar

Online Shop: http://www.newsmyshop.com/

Window N90

Download:

Online Shop:

Cube U9GT2

Download: http://www.51cube.com/tools.asp

Product Introduction: http://www.51cube.com/pro_x.asp?id=651

Online Shop: http://detail.tmall.com/item.htm?id=13263860363&prt=1322548696739&prc=2

Fuzhou Rockchip grabs 70% market share of China’s tablet PC chips [What’s On Xiamen, Dec 6, 2010]

… “Almost all the big venture capital companies in China have indicated an interest in investing in us,” said Chen Feng, chief marketing officer of Fuzhou Rockchip Electronics Co Ltd, a Chinese tablet PC chip producer. Its chips have a market share of about 70 percent in China.

The company has produced 5 million chips for tablet PCs since April. “The market is heating up and next year investments in tablet PCs will become red hot,” said Chen. He said Rockchip will accept venture capital when they find the right partner. …

ARM at CES2011 with Rockchip [ARMflix, Jan 6, 2011]

ARM talks to Rockchip about their newest ARM-based chips at this year’s CES show.

Rockchip Releases its NEW Mobile Internet Platform – RK29xx World’s 1st SOC for 1080P VP8+android 2.3+Internet TV+1080P+3D GPU [Rockchip press release, Jan 7, 2011]

Fuzhou Rockchip Electronics Co., Ltd, a leading developer of fabless semiconductors, today released its new RK29xx generation Mobile Internet Platform.

RK2918 is a high-performance, low-power processor designed for mobile internet applications. The CPU subsystem is an ARM® Cortex-A8 CPU and includes the NEON SIMD engine to improve software media processing capability. With the TSMC advanced process, the A8 core can enable up to 1.2GHz.

RK2918 is the world’s first SOC to support decoding of the Full HD (1080P) VP8 video codec entirely in hardware. It also provides FULL HD decoder and encoder processor, hardware accelerated Adobe® Flash® Player 10.1, ultra powerful 3D/2D GPU, high speed internet surfing experience and more.

RK2918 now supports Gingerbread (Android 2.3) for Mobile Internet Devices, Smartphone and Internet TV, etc. Highlights of the RK29XX include:

  • 1.2G ARM Cortex A8 core with Neon and 512KB L2 cache
  • High performance 2D and 3D processors support OPENGL ES 2.0 and OPEN VG, Support 60M tri/s max
  • 1080P video decoding for H.264, VP8, RV, WMV, AVS, H.263, MPEG4 etc.
  • 1080P video encoding for H.264
  • Support DDRIII, DDRII, Mobile DDR memory
  • 24bit HW ECC for MLC NAND, support e-MMC boot
  • Three USB ports for Device, Host, 3G module
  • Two SD ports for SD card and WIFI
  • Sensors interface for front and rear camera, up to 5M
  • Standard TFT/EPD controller for variable panels
  • MAX 8 channel I2S  and SPDIF output for HD movie
  • TS port for mobile and terrestrial TV, ATSC-T/MH…
  • Ethernet networking interfaces
  • Support VoIP
  • Support Android 2.3 and future version

Rockchip will highlight MID and Internet TV powered by RK29xx at CES, and Rockchip’s  Internet TV solution with new technique and applications based on Android OS.

Rockchip and WebM release RK29XX–World’s first SOC to support WebM HD Video Playback in Hardware [Rockchip press release, Jan 7, 2010]

Fuzhou Rockchip Electronics Co., Ltd, a leading developer offabless semiconductors, today released its new RK29XX generation mobile Internet platform.

Rockchip 55-nm RK29XX solution is a high-performance, low-power processor designed for mobile internet applications. It integrates an ARM® Cortex-A8 CPU includes the NEON SIMD engine to improve software media processing capability. With TSMC advanced process, the A8 core can enable up to 1.2GHz. RK29XX also provides FULL HD decoder and encoder processor, hardware accelerated Adobe® Flash® Player 10.1, ultra powerful 3D/2D GPU, high speed internet surfing experience and more, now RK29XX supports Gingerbread (Android 2.3).

The RK29XX is the world’s first system-on-a-chip (SOC) to support 1080P HD decoding of the VP8 video codec entirely in hardware. VP8 is the codec used in the open WebM video format. To build VP8 decoding the RK29xx graphics accelerators, Rockchip licensed the WebM project’s G-Series 1 video decoder IP design.

“Cooperating with WebM has brought the benefit of Rockchip’s years of experience in the audio and video fields,” said Chen Feng, Vice Present of Rockchip. “The successful support of VP8 marks China’s semiconductor industry becoming international and Rockchip is devoted to continued support.”

“We’re very excited that Rockchip chose our G-Series 1 hardware design to add VP8 support to the RK29XX,” said Jani Huoponen, Hardware Product Manager for the WebM project. “Playback of HD content in hardware is very important to the WebM project and we look forward to seeing deployment of devices powered by the RK29xx.”

About WebM

The WebM project is dedicated to developing a high-quality, open video format for the web that is freely available to everyone.To learn more, visit www.webmproject.org

Industry background

A New Threat to Korean Semiconductor Companies? [Korea IT Times, March 8, 2012]

China’s semiconductor design technology has greatly advanced. Now, Chinese semiconductor design companies are threatening Korean competitors. Some Korean companies expect to have tough competition with Chinese competitors in the near future.

According to industrial sources, Chinese companies such as Huawei and ZTE are hiring thousands of excellent semiconductor designers. Huawei unveiled a smartphone whose quad core application processor was featured at the MWC 2012. Surprisingly, Huawei did not use Nvidia and Qualcomm products. The quad-core AP K3V2 CUP for this smartphone was jointly developed by Huawei and its subsidiary, HiSilicon.  The chip will go on sale in March. HiSilicon also announced the world’s first multi-mode baseband chips that supports LTE-FDD, TD-LTE and 3GPP Release 9.

The design capabilities of Chinese companies are growing fast thanks to excellent human resources who returned to China from the Silicon Valley. It has also received the support of the Chinese government and conglomerate Chinese set companies. Moreover, China’s independent standards such as TD-LTE, CMMB have become the foundation for reinforcing the technological power of Chinese companies. Some say that the design capabilities of Chinese companies are stronger than those of Korean firms. ZTE, the world’s fourth largest cell phone maker, produces its own special chips; some of which are exported to Korea. The company developed and used TD-LTE baseband chipsets or chipsets for telecommunication equipment in its products. They even design and use analog semiconductors.

The growth of these companies is noteworthy. It is expected that these corporations will post one trillion won [US$ 3.56 billion] in sales this year. China has about 500 fables companies. HIS iSuppli expects that total sales of Chinese companies will be doubled to USD 10.7 billion in 2015 from USD 5.2 billion in 2010.  HiSilicon, the biggest fables company in China has been said to post about USD850 million in sales last year. This year, the company is expected to post USD1 billion in sales. Huawei is its biggest customer.

Spreadtrum, specializing in basebands and RF chips, saw its 2011 sales jump 94.7% to USD 674 million. This is due to the expansion of the 3G chipset sector by a whopping 336.8%. Spreadtrum modem chips are used in the Galaxy S2 or Galaxy Note exported to China. At this current pace, its sales are expected to surpass one trillion won within one to two years.

In the AP sector, Rockchip and Ingenichave remarkably grown. Rockchip recently released a 1.4㎓ AP which used an ARM Cortex-A9 dual core CPU. The AP is competitive in terms of price and performance.

Innopfidei is performing well in the digital audio broadcasting chip sector. RDA Micro Electronics specializes in RFs and mixed signal semiconductors and is also growing rapidly. In 2011, this company posted USD 289 million, an increase of 51% from 2010.

“The history of China’s semiconductor industry is short, up to 15 years,” said a semiconductor industry expert. “Those who returned from the Silicon Valley are taking the lead in the development of the Chinese semiconductor industry.  Soon Chinese fable companies will post one trillion won in sales.”

Manufacturing background

Rockchip Collaborates with Synopsys and Chartered to Achieve First-Pass Silicon Success [Chartered press release, Aug 3, 2009]

Fuzhou Rockchip Electronics Company, Ltd., Synopsys, Inc. and Chartered Semiconductor Manufacturing Ltd. today announced that Rockchip has achieved first-time silicon success on its next-generation multimedia system-on-a-chip (SoC), using a combination of Synopsys’ tools, intellectual property (IP) and services with Chartered’s 65-nanometer (nm) manufacturing technology. The RK 28 multimedia SoC, Rockchip’s first mass-production 65nm chip designed in China and targeted primarily for the China market, is an application processor for mobile handheld devices. The RK28 chip was designed with Synopsys’ full RTL-to-GDSII flow using best-in-class technology from the Galaxy™ Implementation and Discovery™ Verification Platforms, as well as DesignWare® IP, and implemented in Chartered’s advanced low-power (65nm LP) process.

“The mobile applications served by our customers require chips that can meet stringent low-power specifications without compromising performance, and our multimedia RK28 SoC delivers on both fronts,” said Feng Chen, chief marketing officer of Rockchip. “Our EDA and manufacturing partners played key roles in the success of our program. Our ability to reach design closure within our market window then rapidly move from tapeout to production silicon validates the choices we made with Synopsys and Chartered.”

Since the 65nm RK28 represented Rockchip’s first design at a new technology node, production-proven technology and knowledge sharing among the parties were essential to project success. The design took advantage of Synopsys’ IC Compiler with Zroute technology to exceed its 500MHz performance target, while employing advanced low-power design techniques such as multi-voltage and power gating to reduce power consumption. The production-proven VMM verification methodology and VCSTM functional verification solution were used to verify Rockchip’s design. The RK28 chip also integrates silicon-proven Synopsys DesignWare IP, including USB 2.0 PHY, USB HS OTG Controller and SD/MMC Host Controller. Design consultants from Synopsys Professional Services worked closely with Rockchip’s engineers throughout the project, merging critical skills and expertise to mitigate project risks and address schedule pressures. The implementation of the design in Chartered’s 65nm LP process enabled the chip to achieve target power, performance and area goals with first silicon, and quickly ramp to production volume.

“At Chartered, we understand our customers need technology and solutions with low risk and high yield to speed time to market, and we are pleased to see our collaboration with Rockchip and Synopsys achieve first-pass silicon success,” said Dr. Liang-Choo “LC” Hsia, senior vice president of technology development at Chartered. “The Rockchip-Synopsys-Chartered collaboration demonstrates how a strong foundation can support companies on the leading edge of design, especially those in the consumer entertainment and mobile applications.”

“Rockchip joins a growing list of innovative chip developers that are taking advantage of Synopsys’ broad portfolio of tools, IP and services to accomplish their aggressive design goals with efficiency,” said John Chilton, senior vice president of marketing and strategic development at Synopsys. “Our collaboration with Rockchip and Chartered demonstrates our commitment to serve customers in China and the rest of the world with solutions that accelerate tapeout and enhance manufacturability.”

SMIC lands new order for 65nm process foundry services [DIGITIMES, Nov 30, 2010]

Foundry chipmaker Semiconductor Manufacturing International Corporation (SMIC) has said it recently grabbed orders for 65nm chips from China-based consumer IC design house Fuzhou Rockchip Electronics. The new orders are expected to help boost further its sales generated from the process.

Fuzhou’s design of a high-end digital-analog mixed SoC chip has successfully entered into commercial production at SMIC using the foundry’s 65nm LP process. Dubbed RK Cayman, the series is targeted for use in digital media players, e-book readers, and other digital consumer products.

SMIC revealed that 65nm accounted for 7.1% of its total wafer revenues in the third quarter pf 2010, up from 3.7% in the second quarter. Demand for the node has been rising at a fast pace, the company added.

In addition, SMIC said sales generated from its 45nm node are expected to become solid starting from the second half of 2011.

Rockchip and SMIC in commercial production of 65-nm multimedia chips [SMIC press release, Nov 29, 2011]

Fuzhou Rockchip Electronics Co., Ltd. (hereinafter referred to as “Rockchip”), a leading Fabless Semiconductor company and mobile-internet SOC solution provider, today announced that its design of a high-end digital-analog mixed SOC chip has successfully entered into commercial production at Semiconductor Manufacturing International Corporation (“SMIC”, NYSE: SMI and SEHK: 0981.HK) using SMIC’s 65-nm Low-Power process.

The Rockchip RK Cayman series solution platform [?RK28xx?], based on ARM9 and DSP dual-core processors, adopts a number of SMIC’s self-developed 65-nm IPs and is a highly-integrated, programmable, and high-performance digital-analog mixed SOC chip. The chip supports 24bit/1K ECC (error checking and correcting), NAND, eMMC, and SPI (Single Program Initiation). With the built-in EPD (Electrophoretic Displays) driver, the chip can support a variety of EPD displays and various formats of 720P video playback. The chip also adopts Synopsys’ USB PHY, PHY I/O and USB 2.0 IP and features an OTG (On-The-Go) function that makes data exchange with other mobile devices quick and easy. The RK Cayman series is targeted for use in MP3, MP4, e-book reader, and other digital consumer product markets.

“Rockchip, with its strong R&D focus, continues to dedicate its in-house development to innovated products and solutions. The RK Cayman chip has a strong computing and video playback capability. The chip also supports CMMB, ISDB, mobile TV and other multimedia features. The camera interfaces also enable video and photo capabilities,” said Feng Cheng, Vice President of Rockchip. “SMIC’s 65-nm platform provides customers solutions with more reliability, stability, and lower costs, and thus significantly enhances our market competitiveness. The success of the RK Cayman chip marks a meaningful milestone for both parties.”

Chris Chi, Senior Vice President and Chief Business Officer of SMIC, said: “The successful collaboration with Rockchip, the leading semiconductor and SOC chip provider in China, further consolidates SMIC’s leadership position in the relevant 65-nm multimedia market. SMIC will continue with the R&D of our 65-nm platform to better serve China’s rapidly growing consumer electronics market.”

SMIC moves 65-nm to volume production [EE Times Europe, Aug 4, 2010]

Chinese chip foundry Semiconductor Manufacturing International Corp. (SMIC) has moved its low-leakage 65-nm process technology into volume production at its 300-mm facility in Beijing, the company said Tuesday (Aug. 3).

SMIC (Shanghai) has shipped more than 10,000 65-nm wafers since mass since the third quarter of 2009, the company said. SMIC, China’s largest wafer foundry, said it is also working on the transition to 55-nm technology.

“SMIC’s 65-nm can take designs at 65-nm and aim it toward the advantages of 55-nm, I’m delighted with the progress of SMIC’s 65/55-nm project team which continues to meet rigorous deadlines,” said Chris Chi, SMIC’s senior vice president and chief business officer.

SMIC CEO: China foundry vendor back on track [EE Times Europe, Oct 11, 2010]

… Wang acknowledged that SMIC is at least five years behind the competition at 65-nm and two-to-three years behind at 45-nm. The goal for the company is to narrow the gap between SMIC and its rivals. …

…  Recently, SMIC has moved its low-leakage 65-nm process technology into volume production at its 300-mm facility in Beijing. It is also working on the transition to 55-nm technology, which is due in pilot production by the third quarter of 2011.

SMIC is also working on a 55-nm general purpose process, which is due in pilot production in the fourth quarter of 2011.

SMIC is also working on a 45-/40-nm low leakage process, which is due in pilot production in the fourth quarter of 2011. SMIC is also working on a 45-/40-nm general purpose process, which is due in pilot production in the second quarter of 2012.

SMIC licensed the 45-nm process from IBM in 2007. SMIC is also devising a 32-nm process, which was also licensed from IBM.SMIC is also working on analog and mixed-signal. It is devising a bipolar-CMOS-DMOS (BCD) process. …

Emerging markets to drive China foundries’ growth: Q&A with Digitimes Research analyst Nobunaga Chai [DIGITIMES, Feb 24, 2011]

China’s foundries may not be able to compete head-to-head against the industry’s global top-three players in the most advanced process technologies, but their opportunities lie elsewhere – their own country and other emerging markets where demand for less sophisticated products will remain robust and drive their growth, according to Nobunaga Chai, author of the recently published Digitimes Research Special Report, “Greater China IC foundry industry overview.”

Q: Though SMIC (Semiconductor Manufacturing International Corporation) and GSMC (Grace Semiconductor Manufacturing Corporation) ranked fourth and tenth globally in 2010, China-based foundries seem to be less competitive in cost and are unable to meet demand for leading-edge applications. Is the situation changing, and what kind of competitiveness do China’s foundries have?

A:In order to improve their competitiveness, China’s foundry players are eager to migrate to next-generation process technologies. Although SMIC is still lagging one to two years behind TSMC (Taiwan Semiconductor Manufacturing Company) in process advancement, it already overcame the problem of low yield at 65nm node in the second quarter of 2010 and managed to raise 65nm node’s share of overall revenues to 7% in third-quarter 2010 from 2% in first-quarter 2010. GSMC also plans to volume produce at 90nm in 2011 to become the second China-based foundry to enter the nanometer club. GSMC, Hua Hong NEC and the Shanghai city government also have a plan to set up a joint venture, Shanghai Huali Microelectronics, which will build a 12-inch fab and directly enter 65nm production.

There is still a big gap between China-based foundries and their Taiwan competitors TSMC and UMC (United Microelectronics Corporation) in R&D for advanced processes, but China’s foundries are in a strong position to meet the robust demand from its home market, Hong Kong and other Asian emerging markets. Demand from the Asian emerging markets will be mainly for chips made using less advanced technologies, which is the strength of China’s foundries.

Q: Can you give us a picture of the Chinese foundries’ capacity expansion roadmap? How fast is their capacity growing?

A:SMIC has been actively ramping its 12-inch capacity, which reached a quarterly capacity of 152,000 8-inch equivalent units in third-quarter 2010 from 138,000 units a quarter earlier. As there is still plenty of room for expansion at SMIC’s 12-inch fabs in Beijing and Shanghai, it currently has no plans to build new 12-inch fabs. But Shanghai Huali will build a 12-inch fab in Shanghai with a monthly capacity of 35,000 wafers (79,000 8-inch equivalent wafers). Others, such as TSMC’s subsidiary and CSMC Technologies, will also expand their 8-inch fabs.

Q: With the industry dominated by such giants as TSMC, UMC and Globalfoundries, will China’s players seek to compete head-to-head against them, or look to other market segments to avoid a head-on clash? SMIC may be an exception, but how good is the chance that it will become a Top-3 player?

A:From the pace of shrinking geometry to the construction of new capacity, TSMC, UMC and Globalfoundries are taking a runaway lead in sub-65nm development against their Chinese competitors. These top players are also giving top priority to advanced nodes when expanding capacity. But that means that if demand continues expanding, low-end capacity for such products as PWMICs and LCD driver ICs – which only need 0.15 micron or more mature processes – will be insufficient. This is where the opportunities will be for China’s foundries that target the lower-end segments.

Up till the end of third-quarter 2010, SMIC had a total quarterly capacity of 489,000 8-inch equivalent wafers, just about half of Globalfoundries’ one million 8-inch equivalent units. Globalfoundries’ Fab 8 in New York is expected to ramp up its capacity to 60,000 12-inch wafers monthly in 2012, further widening the capacity gap between Globalfoundries and SMIC. Therefore, it is unlikely that SMIC will become a Top-3 player in the near future. But SMIC will see major momentum of growth from the strong demand from its major markets – China and other emerging markets.

Q: How fast will China’s foundry production value grow?

A: Demand from China, Hong Kong and Asia’s emerging markets will remain strong, with the communications and consumer electronics segments to see particularly strong growth. With China’s foundries ramping up their capacities, Digitimes Research predicts that China’s foundry sector will have a high single-digit CAGR from 2010-2013.

Nokia under transition (as reported by the company)

Note and updates: stock price is up 3.17%  as per above (those numbers are in US$)
– see more: Nokia trying the first Lumia month in China with China Telecom exclusive [March 28, 2012]
– Nokia seeks to retake China market share [Reuters, March 28, 2012]: “Shares in Nokia rose 3 percent to 4.116 euros, helped also after Sweden’s Swedbank lifted its rating to “buy” from “neutral”.
– Are Nokia’s Largest Shareholders Betting on a Turnaround With New Releases in China? [Wall St. Cheat Sheet, March 28, 2012]

279 institutional firms indicated owning shares of Nokia Corporation (NYSE:NOK) in both Q3 2011 and Q4 2011. These firms reported owning a total of 348.305 million shares on 09/30/2011 and 382.757 million shares [out of 3.74B, i.e. ~10%] on 12/31/2011. The shares closed at $5.66 on 09/30/2011 and $4.82 on 12/31/2011, for an aggregate market value of $1.971 billion and $1.845 billion, respectively.

– Nokia: The Recovery Begins; One Analyst Turns Bullish [Forbes, March 30, 2012]

… Town Hall Investment Research analyst Jamie Townsend this morning upped his rating onNokia to Buy from Avoid.

His view: for Nokia, the turnaround has begun. And for that he credits the company’s still unfolding new relationship with Microsoft, and its decision to adopt Windows Phone 7 as the operating system for its high-end smartphones.

“Our renewed enthusiasm is primarily driven by Nokia’s smartphone business and our belief that long term the company is now poised to slowly reestablish itself as a meaningful player in smartphone markets around the world,” Townsend writes in a research note. “While we believe that Q1 and Q2 2012 will continue to show the struggle between the death of Symbian and the rise of WP7, we also believe the pieces are now in place for a gradual reversal in the market share losses experienced in the last three years. Specifically, we are expecting positive unit surprises in the U.S. and Western Europe over the next two quarters, albeit coming off a very low base and expectations. While only a wild card right now, we also believe that some sort of partnership between Microsoft, Nokia and RIM is now a real possibility.”

“We believe that there are two issues for RIM that relate to NOK,” he writes. “First, we believe that RIM is now where NOK was approximately a year ago. There was no longer any doubt as to the declining state of the smartphone business but also no clear path to recovery. As we know from Nokia’s last year, the recovery required bold action and the a long lead time to the actual point of product improvement. We believe investors should wait until the recovery is clear which in our view is not yet the case with RIM, but is now on the near horizon for NOK.”

“Second, RIM management on the quarterly conference call made it abundantly clear that the company is seeking a new partnership that will allow it to enhance its consumer appeal but allow it to focus its attention on its core historical strength with the enterprise,” he adds. “We believe that this strategy carries a number of risks, but also believe that Nokia/Microsoft represents the most likely candidate for such a partnership. We have no data points to support that this will happen or that Nokia/Microsoft would want it to, but believe it to be a real possibility over the next six months. Should it occur we believe it would be perceived as a meaningful positive for NOK shares.”

NOK this morning is up 7 cents, or 1.2%, to $5.49.

End of updates

According to the below excerpts from the Nokia 2011 fiscal year report [March 8, 2012]

Current strategic business units, their responsibilities and accountabilities:

[F-9] As of April 1, 2011, the Group’s operational structure featured two new operating and reportable segments: Smart Devices and Mobile Phones, which combined with Devices & Services Other and unallocated items form Devices & Services business.

As of October 1, 2011, the Group formed a Location & Commerce business which combines NAVTEQ and Nokia’s social location services operations from Devices & Services. Location & Commerce business is an operating and reportable segment. From the third quarter 2008 until the end of the third quarter 2011, NAVTEQ was a separate reportable segment of Nokia. As a consequence, Nokia currently has four operating and reportable segments: Smart Devices and Mobile Phones within Devices & Services, Location & Commerce and Nokia Siemens Networks.

Prior year segment specific results for 2009 and 2010 have been regrouped and recasted for comparability purposes according to the new operational structure.

[F-26] Nokia’s reportable segments represent the strategic business units that offer different products and services. The chief operating decision maker receives monthly financial information for these business units. Key financial performance measures of the reportable segments include primarily net sales and contribution/operating profit. Segment contribution for Smart Devices and Mobile Phones consists of net sales as well as its own, directly assigned costs and allocated costs but exclude major restructuring projects/programs and certain other items that are not directly related to the segments. Operating Profit is presented for Location & Commerce and Nokia Siemens Networks. Nokia evaluates the performance of its segments and allocates resources to them based on operating profit/contribution.

Smart Devices focuses on smartphones and smart devices and has profit-and-loss responsibility and end-to-end accountability for the full consumer experience, including product development, product management and product marketing. ([52] Nokia’s portfolio of smartphones covers price points ranging from around EUR 100 to more than EUR 500, excluding taxes and subsidies. During 2011, we shipped approximately 77.3 million smartphones.)

Mobile Phones focuses on mass market feature phones and related services and applications and has profit-and-loss responsibility and end-to-end accountability for the full consumer experience, including development, management and marketing of feature phone products, services and applications. ([54] Nokia’s portfolio of feature phones covers a wide range of price points from the Nokia 100, our most affordable device which costs about EUR 20, excluding taxes and subsidies, through to devices with more premium features costing upwards of EUR 100, excluding taxes and subsidies. During 2011, we shipped approximately 339.8 million feature phones.)

Devices & Services Other includes net sales of Vertu, spare parts and related cost of sales and operating expenses, as well as intellectual property related royalty income. Operating expenses of Devices & Services Other also include common research and development. Other income and expenses include major restructuring projects/programs related to the Devices & Services business as well as other unallocated items.

Location & Commerce develops a range of location-based products and services for consumers, as well as platform services and local commerce services for the Group’s feature phones and smartphones ([96] in support of our strategic goals) as well as ([96] a portfolio of products for the broader Internet ecosystem, including products for our direct competitors) for other device manufacturers, application developers, Internet service providers, merchants, and advertisers. Location & Commerce also continues to serve NAVTEQ’s existing customers both in terms of provision of content and as a business-to-business provider of map data ([56]providing comprehensive digital map information and related location-based content and services for mobile navigation devices, automotive navigation systems, Internet-based mapping applications and government and business solutions). Location & Commerce has profit and loss responsibility and end-to-end accountability for the full consumer experience.

Nokia Siemens Networks provides a portfolio of mobile, fixed and converged network technology, as well as professional services including managed services, consultancy and systems integration, deployment and maintenance to operators and service providers.

[F-71] Nokia Siemens Networks B.V., the ultimate parent of the Nokia Siemens Network group, is owned approximately 50% by each of Nokia and Siemens and consolidated by Nokia. Nokia effectively controls Nokia Siemens Networks as it has the ability to appoint key officers and the majority of the members of its Board of Directors, and accordingly, Nokia consolidated Nokia Siemens Networks.

Business and segment information:

2009 2010 2011
Devices & Services
Net sales (EUR in M) 27853 29134 23943
Operating profit (EUR in M) 3564 3540 884
Gross margin 33.10% 29.90% 27.70%
Operating margin -1% 12.20% 3.70%
Volume (units in M) 431.8 452.9 417.1
ASP (EUR) 64 64 57
Smart Devices
Net sales (EUR in M) 12649 14874 10820
Gross margin 37.20% 30.80% 23.70%
Contribution margin 11.40% 9.30% -3.80%
Volume (units in M) 67.8 103.6 77.3
ASP (EUR) 187 144 140
Mobile Phones
Net sales (EUR in M) 14644 13696 11930
Gross margin 28.50% 28.00% 26.10%
Contribution margin 15.30% 17.00% 12.40%
Volume (units in M) 364 349.2 339.8
ASP (EUR) 40 39 35
Location & Commerce
Net sales (EUR in M) 756 869 1091
Operating profit (EUR in M) -594 -663 -1526
Gross margin 82.70% 80.60% 80.40%
Operating margin -78.60% -76.30% -139.90%
Nokia Siemens Networks
Net sales (EUR in M) 12574 12661 14041
Operating profit (EUR in M) -1639 -686 -300
Gross margin 27.10% 26.80% 27.10%
Operating margin -58% -5.40% -2.10%
Nokia Group
Net sales (EUR in M) 40984 42446 38659
Operating profit (EUR in M) 1197 2070 -1073
Gross margin 32.40% 30.20% 29.30%
Operating margin 2.90% 4.90% -2.80%

The overall market situation and the related Nokia strategies and actions:

Devices & Services:

[87] In 2011, the global mobile device market benefited from continued strength in key growth markets, such as the Middle East and Africa, Greater China and Latin America and, according to our estimate, industry mobile device volumes increased by 11% during the year. Smartphones continued to capture the major part of the volume and value growth, as well as the public focus, in the mobile device market. We estimate that our mobile device volume market share was 26% in 2011, compared to an estimated 32% in 2010, with the decline primarily driven by market share losses in the smartphones segment.

In February 2011, we announced our new strategy for our Devices & Services business, which has three core elements.

First, in smartphones, we announced our partnership with Microsoft, discussed below, to bring together our respective complementary assets and expertise to build a new global mobile ecosystem for smartphones. Under the partnership, formalized in April 2011, we are adopting and licensing Windows Phone from Microsoft as our primary smartphone platform. We launched our first Nokia products with Windows Phone under the Lumia brand in October 2011.

Second, in feature phones, our strategy continues to be to leverage our innovation and strength in growth markets to connect the next billion people to the Internet and information. Through our investments in developing assets designed to bring a modern mobile experience – software, services and applications – we believe we have the opportunity to connect the “next billion” aspirational consumers around the world to the Internet and information, especially in key emerging markets.

Third, we believe we must also invest to take advantage of future technology disruptions and trends. Through ongoing research and development, we plan to explore and lead next-generation opportunities in devices, platforms and user experiences to support our industry position and longerterm financial performance.

The competitive landscape for that is the following:

[60] The mobile device market continues to undergo significant changes, most notably due to the broad convergence of the mobile telecommunications, computing, consumer electronics and Internet industries. With the traditional feature phone market continuing to mature, a major part of volume and value growth in the industry has been in smartphones offering access to the Internet. Additionally, other large handheld Internet-centric computing devices, such as tablets and e-readers, have emerged, trading off pocketability and some portability for larger screen sizes, but in many cases offering both cellular and non-cellular connectivity in the same way conventional mobile devices do. Due to their larger size, such devices are not replacing conventional mobile devices, but are generally purchased as a second device. Nevertheless, larger-screened Internet-enabled devices have captured a significant share of consumer spend across the broader market for mobile products and digital content and in different ways. For example, some competitors seek to offer hardware at a low price to the consumer with the aim of capturing value primarily through the sale of content.

The increasing demand for wireless access to the Internet has had a significant impact on the competitive landscape of the market for mobile products and digital content. Companies with roots in the mobile devices, computing, Internet and other industries are increasingly competing directly with one another, making for an intensely competitive market across all mobile products and services. At the same time, and particularly in the smartphone and tablets segments, success for hardware manufacturers is increasingly shaped by their ability to build, catalyze or be part of a competitive ecosystem, where different industry participants, such as hardware manufacturers, software providers, developers, publishers, entertainment providers, advertisers and e-commerce specialists are forming increasingly large communities of mutually beneficial partnerships in order to bring their offerings to the market. A vibrant ecosystem creates value for consumers, giving them access to a rich and broad range of user experiences. As a result, the competitive landscape is increasingly characterized in terms of a “war of ecosystems” rather than a battle between individual hardware manufacturers or products.

At the heart of the major ecosystems is the operating system and the development platform upon which devices are based and services built. In smartphones, our competitors are pursuing a wide range of strategies. Many device manufacturers are utilizing freely available operating systems, the development of which is not paid for from device sales revenue or software license fees. The availability of Google’s Android platform has made entry into and expansion in the smartphone market easier for a number of hardware manufacturers which have chosen to join Android’s ecosystem, especially at the mid-to-low range of the smartphone market. For example, some competitors’ offerings based on Android are available for purchase by consumers for below EUR 100, excluding taxes and subsidies, and thus address a portion of the market which has been traditionally dominated by feature phone offerings, including those offered by Nokia. Accordingly, lower-priced smartphones are increasingly reducing the addressable market and lowering the price points for feature phones.

In general, we believe product differentiation with Android is more challenging, leading to increased commoditization of these devices and the resulting downward pressure on pricing. In addition, there is uncertainty in relation to the intellectual property rights in the Android ecosystem, which we believe increases the risk of direct and indirect litigation for participants in that ecosystem. Google, HTC, LG, Motorola, Samsung and Sony Ericsson are among competitors which have deployed the Android operating system on their smartphones. Samsung is among our strongest competitors, competing with us across a broad range of price points.

Other companies favor proprietary operating systems, including Apple, whose popular high-end iPhone models use the iOS operating system, and Research in Motion (RIM), which deploys Blackberry OS on its mobile devices. Both Apple and RIM have developed their own application stores, through which users of their products can access applications.

Apple, which has already gained a strong position in the market for high-end smartphones and tablets, has also used the strength of its ecosystem to further expand its offering of digital content through other interfaces such as television sets. Similarly, Google has sought to extend the Android ecosystem with its Google TV Internet-based television service.

Nokia currently offers smartphones based on the Symbian, MeeGo and Windows Phone operating systems, and we are transitioning to using Windows Phone as our primary smartphone platform. Users of Symbian-based Nokia products can access digital content and third-party applications through Nokia Store, while users of our Windows Phone devices can access the Microsoft-run Marketplace for digital content and third-party applications. The Windows Phone operating system is also being deployed on smartphones by others, including HTC and Samsung.

The significant momentum and market share gains of the global ecosystems around the Apple and Android platforms have increased the competitive barriers to additional entrants looking to build a competing global smartphone ecosystem, such as Nokia with the Windows Phone platform. At the same time, other ecosystems are being built which are attracting developers and consumers, and which may result in potential fragmentation among ecosystem participants and the inability of new ecosystems to gain sufficient competitive scale.

We also face intense competition in feature phones where a different type of ecosystem from that of smartphones is emerging involving very low-cost components and manufacturing processes, with speed to market and attractive pricing being critical success factors. In particular, the availability of complete mobile solutions chipsets from low-cost reference design chipset manufacturers has lowered the barriers of market entry and enabled the very rapid and low-cost production of feature phones by numerous manufacturers in China and India, which are gaining significant market share in emerging markets, as well as bringing some locally relevant innovations to market. Such manufacturers have also demonstrated that they have significantly lower gross margin expectations than we do.

We also face competition from vendors of unlicensed and counterfeit products with manufacturing facilities primarily centered around certain locations in Asia and other emerging markets which produce inexpensive devices with sometimes low quality and limited after-sales services that take advantage of commercially-available free software and other free or low-cost components, software and content. In addition, we compete with non-branded feature phone manufacturers, including mobile network operators, which offer mobile devices under their own brand, as well as providers of specific hardware and software layers within products and services at the level of those layers rather than solely at the level of complete products and services and their combinations. In the future, we may face competition from established Internet companies seeking to offer smartphones under their own brand.

Our competitors use a wide range of other strategies and tactics. Certain competitors choose to accept significantly lower profit margins than we are targeting. Certain competitors have chosen to focus on building products and services based on commercially available components and content, in some cases available at very low or no cost. Certain competitors have also benefited from favorable currency exchange rates. Further, certain competitors may benefit from support from the governments of their home countries and other measures which may have protectionist objectives.

Transition:

[88] Year 2011 was a year of transition for Nokia. Prior to the announcement of our partnership with Microsoft in February 2011 and the adoption of Windows Phone as our primary smartphone platform, the Symbian and MeeGo operating systems were our primary smartphone platforms. Following our announcement of the Microsoft partnership, we expected to sell approximately 150 million more Symbian devices in the years to come and to ship one MeeGo device. However, the demand for our Symbian devices began to deteriorate. The consequent decline in our Smart Devices net sales and profitability was a result of both a decline in our Symbian smartphone volume market share and pressure on pricing as competitors aggressively capitalized on our platform and product transition. Towards the end of 2011, the competitiveness of our Symbian devices continued to deteriorate as changing market conditions created increased pressure on Symbian, which further adversely affected our Smart Devices net sales, profitability, market share and brand perception. In certain markets, there has been an acceleration of the trend towards lower-priced smartphones with specifications that are different from Symbian’s traditional strengths, which has contributed to a faster decline in our Symbian volumes than we anticipated. We expect this trend to continue in 2012.

To endeavor to maximize the value of our Symbian asset going forward, we expect to continue to ship Symbian devices to specific regions and distribution channels, as well as to continue to provide software support to our Symbian customers, through 2016. The software support for our Symbian customers was outsourced to Accenture commencing from September 2011. As a result of the changing market conditions, combined with our increased focus on Nokia products with Windows Phone, we believe we will sell fewer Symbian devices than previously anticipated.

Towards the end of 2011, we launched the Nokia Lumia 800 and Nokia Lumia 710, our first smartphones based on the Windows Phone platform. During 2011, we also launched the Nokia N9, which was the outcome of efforts in our MeeGo program. Since the start of 2012, we have continued to bring the Lumia experience to several more geographies, including the United States, where we have launched the Nokia Lumia 900, the first LTE device designed specifically for the North American market, which is available exclusively through AT&T. In late February 2012, we announced our intention to bring the Lumia 900 to markets outside the United States and introduced the Lumia 610, our lowest cost Lumia smartphone to date.

During the first half of 2011, our mobile device market share decline was further negatively affected by weakness in our feature phone portfolio primarily due to a lack of a dual SIM offering. During the second half 2011, however, the competitiveness of our feature phones improved when we introduced several dual SIM devices, as well as the new Nokia Asha range of feature phones, which offers a more smartphone-like user experience. These new additions helped us recapture some market share in the feature phone segment.

Year 2012 is expected to continue to be a year of transition, during which our Devices & Services business will be subject to risks and uncertainties, as our Smart Devices business unit continues to transition from Symbian products to Nokia products with Windows Phone and our Mobile Phones business unit continues to bring more smartphone-like features and design to our feature phone portfolio. Those risks and uncertainties include, among others, continued deterioration in demand for our Symbian devices; the timing, ramp-up and demand for our new products, including our Lumia devices; further pressure on margins as competitors endeavor to capitalize on our platform and product transition; and uncertainty in the macroeconomic environment. Mainly due to these factors, we believe that it is not appropriate to provide annual financial targets for 2012.

Longer-term, we target:
• Devices & Services net sales to grow faster than the market, and
• Devices & Services operating margin to be 10% or more, excluding special items and purchase price accounting related items.

Partnership with Microsoft:

[F-26] In February 2011, Nokia announced a partnership with Microsoft to bring together the respective complementary assets and expertise of both parties to build a new global mobile ecosystem for smartphones. The partnership, under which Nokia is adopting and licensing Windows Phone from Microsoft as its primary smartphone platform, was formalized in April 2011.

The Group is paying Microsoft a software royalty fee to license the Windows Phone smartphone platform, which the Group records as royalty expense in its Smart Devices cost of goods sold. Nokia has a competitive software royalty structure, which includes annual minimum software royalty commitments and reflects the large volumes that the Group expects to ship, as well as a variety of other considerations related to engineering work to which both companies are committed. The Group expects that the adoption of Windows Phone will enable it to reduce significantly its operating expenses.

In recognition of the contributions that the Group is providing, the Group will receive quarterly platform support payments from Microsoft. ([90] In the fourth quarter of 2011, we received the first quarterly payment of USD 250 million (approximately EUR 180 million).) The received platform support payments are recognized over time as a benefit to our Smart Devices costs of goods sold. The total amount of the platform payments is expected to slightly exceed the total amount of the minimum software royalty commitments.

The Microsoft partnership also recognizes the value of intellectual property and puts in place mechanisms for exchanging intellectual property rights.

[89] We are contributing our expertise on hardware, design and language support to the Microsoft partnership, and plan to bring Nokia products with Windows Phone to a broad range of price points, market segments and geographies. We and Microsoft are closely collaborating on joint marketing initiatives and on a shared development roadmap on the future evolution of mobile products. The goal for both partners is that by bringing together our complementary assets in search, maps, locationbased services, e-commerce, social networking, entertainment, unified communications and advertising, we can jointly create an entirely new consumer proposition. We are also collaborating on our developer ecosystem activities to accelerate developer support for the Windows Phone platform on our mobile products. Although Microsoft will continue to license Windows Phones to other mobile manufacturers, the Microsoft partnership allows us to customize the Windows Phone platform with a view to differentiating Nokia smartphones from those of our competitors that also use the Windows Phone platform.

Specific initiatives include the following:

  • Contribution of our mapping, navigation, and certain location-based services to the Windows Phone ecosystem. We aim to build innovation on top of the Windows Phone platform in areas such as imaging, while contributing our expertise on hardware design and language support, to help drive the development of the Windows Phone platform. Microsoft will provide Bing search services across our mobile device portfolio and will contribute its strength in productivity tools, advertising, gaming, social media and a variety of other services. We believe that the combination of navigation with advertising and search services will enable better monetization of our navigation assets and create new forms of advertising revenue.
  • Joint developer outreach and application sourcing to support the creation of new local and global applications, including making Windows Phone developer registration free for all Nokia developers.
  • Planning towards opening a new Nokia-branded global application store that leverages the Windows Marketplace infrastructure. Developers would be able to publish and distribute applications to hundreds of millions of consumers that use Windows Phone, Symbian and Series 40 devices.
  • Contribution of our expertise in operator billing to ensure participants in the Windows Phone ecosystem can take advantage of our billing relationships with 112 operators in 36 markets.

Strategy for the trend: Continued Convergence of the Mobile Communications, Computing, Consumer Electronics and Internet Industries

[90] Value in the mobile handset industry continues to be increasingly driven by the convergence of the mobile communications, computing, consumer electronics and Internet industries. As consumer demand and interest for smartphone and tablets with access to a range of content has accelerated, new opportunities to create and capture value through innovative new service offerings and user experiences have arisen, with a greater emphasis and importance on software and ecosystem-driven innovation, rather than standalone devices. These opportunities seek to capitalize on various elements of ecosystems such as search services, maps, location-based services, e-commerce, social networking, entertainment, communications and advertising. Capturing these opportunities requires capabilities to manage the increased complexity and to provide an integrated user experience where all these various elements interact seamlessly either in one device or across multiple devices and electronic products. We expect these new opportunities to continue to emerge in 2012.

We believe that we are well-positioned with our new strategy and partnership with Microsoft, including our collective goal to build a new global mobile ecosystem for smartphones, to capture a number of these opportunities.

In Mobile Phones, we plan to leverage our innovation and strength in growth markets to connect the next billion people to the Internet and information. We also plan to drive third party innovation through working with our partners to engage in building strong, local ecosystems for our feature phones.

Strategy for the trend: Increasing Importance of Competing on an Ecosystem to Ecosystem Basis

[91] The increasing importance of ecosystems is, to a large degree, driven by the convergence trends mentioned above and the implications for the competencies and business model adjustments required for longer-term success. In the market for smartphones, we have seen significant momentum and emphasis on the creation and evolution of new ecosystems around major software platforms, including Apple’s iOS platform and Google’s Android platform, bringing together devices, software, applications and services. A notable recent development has been the increased affordability of devices based on the Android smartphone platform, which has enabled them to compete with a portion of the market that has traditionally been dominated by feature phone offerings. As Android is available free of charge and a significant part of the source code is available as open source software, entry and expansion in the smartphone market has become easier for a number of hardware manufacturers that have chosen to join Android’s ecosystem. Additionally, the success of an ecosystem and its ability to continue to grow may also depend on the support it lends to different kinds of devices. With multiple products available to suit different needs, such as mobile devices, tablets, computers and televisions, there is demand for greater seamless interaction between these devices. A number of vendors across different ecosystems are pursuing multi-screen strategies to capitalize on these opportunities.

Our partnership with Microsoft brings together complementary assets and competencies with the aim of creating a competitive smartphone ecosystem. We believe that together with Microsoft we will succeed in attracting the necessary elements for the creation of a successful ecosystem and that by extending the price points, market segments and geographies of our Windows Phone smartphones, we will be able to significantly strengthen the scale and attractiveness of that ecosystem to developers, operators and partners.

Strategy for the trend: Increased Pervasiveness of Smartphones and Smartphone-like Experiences Across the Price Spectrum

[91] During the past year, we saw the increasing availability of more affordable smartphones, particularly Android-based smartphones, connected devices and related services which were able to reach lower price points contributing to a decline in the average selling prices of smartphones in our industry.

This trend affects us in two ways.

First, it puts pressure on the price of our smartphones and potentially our profitability, as we need to price our smartphones competitively. We currently partially address this with our Symbian device offering in specific regions and distribution channels, and we plan to introduce and bring to markets new and more affordable Nokia products with Windows Phone in 2012, such as the Nokia Lumia 610 announced in February 2012.

Second, lower-priced smartphones put pressure on our higher-end feature phone offering from our Mobile Phones unit. We are addressing this with our planned introductions in 2012 of smarter, competitively priced feature phones with more modern user experiences, including software, services and application experiences. In support of our Mobile Phones business, we also plan to drive third party innovation through working with our partners to engage in building strong, local ecosystems.

Strategy for the trend: Increasing Challenges of Achieving Sustained Differentiation and Impact on Overall Industry Gross Margin Trends

[91] Although we expect the mobile device industry to continue to deliver attractive revenue growth prospects, we are less optimistic about the gross margin trends going forward. The creation and momentum of new ecosystems, especially from established Internet players with disruptive business models, has enabled handset vendors that do not have substantial software expertise or investment in software development to develop an increasingly broad and affordable range of smartphones and other connected devices that feature a certain user interface, application development and mobile service ecosystems. At the same time, this has significantly reduced the amount of differentiation in the user experience in the eyes of consumers. Our ability to achieve sustained differentiation with our mobile products is a key driver of consumer retention, net sales growth and margins. We believe that as it becomes increasingly difficult for many of our competitors to achieve sustained differentiation, overall industry gross margin trends may be depressed going forward.

Through our partnership with Microsoft and development of the Windows Phone ecosystem, we will focus more of our investments in areas where we believe we can differentiate and less on areas where we cannot, leveraging the assets and competencies of our ecosystem partners. Areas where we believe we can achieve sustained product differentiation and leadership include distinctive design with compelling hardware, leading camera and other sensor experiences and leading location-based products and services. Other ways for us to differentiate our products include using our localization capabilities, global reach, strong brand and marketing. We believe that our first Lumia devices reflect a number of these new and differentiated experiences on Windows Phone. We expect to continue to introduce new and more differentiated products from our Lumia product family in multiple markets throughout 2012.

In the Mobile Phones business, we believe our competitive advantages – including our scale, brand, quality, manufacturing and logistics, strategic sourcing and partnering, distribution, research and development and software platforms and intellectual property – continue to be important to our competitive position. Additionally, we plan to extend our Mobile Phones offerings and capabilities during 2012 in order to bring a modern mobile experience – software, services and applications – to aspirational consumers in key growth markets as part of our strategy to bring the Internet and information to the next billion people. At the same time, we plan to drive third party innovation through working with our partners to engage in building strong, local ecosystems.

Finally, we believe that we must invest in new projects to drive differentiation and take advantage of future technology disruptions and trends. Through ongoing research and development, we plan to explore and lead next-generation opportunities in devices, platforms and user experiences to support our industry position as well as our ability to further differentiate over the longer-term. For example, new web technologies such as those commonly referred to as HTML5 may lead to less operating system-centric ecosystems. It is important to be able to drive such industry developments, which we believe will define the future of our industry.

Strategy for the trend: Emergence of New Business Models

[92] We believe that the traditional industry monetization model – capturing the value of the overall experience through the sale of a mobile device – will continue to dominate in the near to medium term. However, we are also seeing the emergence of new indirect monetization models where the value is captured through indirect sources of revenue such as advertising revenue through applications rather than the actual sale of a device. These indirect monetization models could become more prominent in our industry in the longer-term. Accordingly, we believe that developing a range of indirect monetization opportunities, such as advertising-based business models, will be part of successful ecosystems over the coming years. Obtaining and analyzing a complex array of customer feedback, information on consumer usage patterns and other personal and consumer data over the largest possible user-base is essential in gaining greater consumer understanding. We believe this understanding is a key element in developing new monetization opportunities and generating new sources of revenue, as well as in facilitating future innovations, including the delivery of new and more relevant user experiences ahead of the competition.

The exploration of new revenue streams is a key element of our partnership with Microsoft. We are jointly developing new services with Microsoft to drive innovation and new sources of revenue from our ecosystem. We believe that our ability to understand the specific needs of different geographic markets and consumer segments and to localize services and applications appropriately will be a key competitive differentiator. To support this, in the coming years we plan to invest in local advertising platforms to further enhance and enrich our localized offerings. Supported by our scale, we believe that we have the opportunity to deliver more compelling and relevant local services and to build new monetization models for Nokia and the Windows Phone ecosystem.

Strategy for the trends in: Supply Chain, Distribution and Operator Relationships

[93] The industry in which we operate is one of the fastest growing and most innovative, with a broad range of industry participants contributing product and technological innovations. In particular, the role of component suppliers has grown in importance. At the same time, much of the value creation for consumers has shifted from hardware to software. Nevertheless, we believe that there continues to be substantial room to innovate in hardware. From that perspective and in order to deliver market-leading innovations and sustainable differentiation through hardware, it is critical to have good relationships with high quality suppliers. With good supplier relationships, allied with the strength of our world-class manufacturing and logistics system, we believe we are well-positioned to deliver high-quality hardware as well as to respond quickly to customer and consumer demand.

Amid rapid change in the industry, we have also seen new sourcing models emerge. Especially in smartphones, our competitors have shifted from traditional multi-sourcing strategies where you have multiple suppliers for each component, to more focused sourcing strategies where they integrate key strategic suppliers closer to their operations as well as use advance cash payments to secure supply for several quarters in advance in order to have more unique and differentiated components as well as more predictability in their sourcing. This means that we also need to look for new and more innovative ways of sourcing key components, particularly in our Smart Devices business.

Our own manufacturing network continues to be a valuable asset, especially in our high-volume Mobile Phones business. We realized, however, that we need to adjust our manufacturing to meet the lower overall demand for our products and increase our speed to market for our mobile products. In 2011 and in February 2012, we announced our plans to adjust our manufacturing capacity and renew our manufacturing strategy to focus product assembly primarily in Asia to better reflect how our global networks of customers, partners and suppliers have evolved. The changes included the closure of our manufacturing facility in Cluj, Romania at the end of 2011. We also announced planned changes at our facilities in Komárom, Hungary, Reynosa, Mexico and Salo, Finland. These three facilities are planned to focus on smartphone product and sales package customization, serving customers mainly in Europe and the Americas, while our smartphone assembly operations will be transferred to our facilities in AsiaBeijing, China and Masan, South Korea – where the majority of our component suppliers are based. With these adjustments to our manufacturing network, we are aiming to continue to generate meaningful benefits relative to our competitors.

As in any global consumer business, distribution continues to be an important asset in the mobile device industry. We believe the breadth of our global distribution network is one of our key competitive advantages. We have the industry’s largest distribution network with more than 850,000 points of sale globally. Compared to our competitors, we have a substantially larger distribution and care network, particularly in China, India and the Middle East and Africa.

During 2011, the importance of operator-driven distribution increased. Whereas in the past operators dominated distribution only in the large western markets in Europe and the United States, they have recently been growing their share of distribution in large growth markets such as China, a traditionally strong market for us. We have been historically more successful where our mobile products are sold to consumers in open distribution through non-operator parties. It is therefore increasingly important to not only have a large number of points of sale globally, but also to have good relationships with key operators in each region.

Strategically, we want to be the preferred ecosystem partner for operators. By creating a new global mobile ecosystem with Microsoft and focusing on driving operator data plan adoption in lower price points with our feature phone offering, we believe we will be able to create a greater balance for operators and provide attractive opportunities to share the economic benefits from services and applications sales compared to other competing ecosystems, thereby improving our long-standing relationships with operators around the world.

Strategy for the trends related to: Speed of Innovation, Product Development and Execution

[94] As the mobile communications industry continues to undergo significant changes, we believe that speed of innovation and product development are important drivers of competitive strength. For example, a number of our competitors have been able to successfully leverage their software expertise to continuously bring innovations to market at a pace faster than typical hardware cycles. This has placed increasing pressure on all industry participants to continue to shorten product creation cycles and to execute in a timely, effective and consistent manner.

In February 2011, we announced our new strategy, including changes to our operational structure, company leadership, decision-making, ways of working and competencies designed to accelerate our speed of execution in an intensely competitive environment. The changes to our ways of working fall into six categories:

  • globally accountable business units;
  • a revised services mission;
  • local empowerment;
  • simplified decision-making;
  • a performance-based culture with consistent behavior; and
  • a new leadership structure with new leadership principles.

We believe under the new operational structure and with these new ways of working we can deliver noticeable improvements to our speed of innovation, product development and execution of both our Smart Devices and Mobile Phones business units.

Strategy for the trends related to: More Active Licensing Strategies of Patents and Intellectual Property

[94] Success in our industry requires significant research and development investments, with intellectual property rights filed to protect those investments and related inventions. In recent years, we have seen new entrants in the industry as new ecosystems have lowered the barriers to entry. In 2011, we saw intensified and more active licensing and enforcement strategies of patents and intellectual property emerge through a series of legal disputes between several industry participants as patent holders sought to protect their intellectual property against infringements by new entrants. It is not only traditional industry participants that have sought to safeguard their intellectual property; non-manufacturing patent licensing entities owning relevant technology patents have also actively been enforcing their patents against new entrants. These companies’ sole business model is to buy patents from the innovators and to maximize the value from those patents. As a result, the industry’s focus on patents and intellectual property has increased significantly and patent portfolios have become increasingly valuable for industry participants. Increased activity has also created lucrative opportunities to monetize patents by selling them to others. We expect this trend to continue in 2012. We believe we are well-positioned to both protect our existing business as well as generate incremental value to our shareholders through our industry-leading patent portfolio.

We are a world leader in the development of mobile devices and mobile communications technologies, which is also demonstrated by our strong patent position. During the last two decades, we have invested more than EUR 45 billion in research and development and built one of the mobile device industry’s strongest and broadest intellectual property right portfolios, with over 10 000 patent families. In 2011, we continued to work hard to enforce our patents against unlawful infringement and realize the value of our intellectual property. Our 2011 initiatives included, among other things, the signing of a patent license agreement with Apple, which we expect will have a positive financial impact on our future business, as well as capitalizing on strong market conditions by divesting several hundred patent families in a series of transactions to non-manufacturing patent licensing entities. Despite such divestments, we have maintained the strength and size of our patent portfolio on a stable level of approximately 10 000 patent families.

Strategy for the trends related to: Uncertain Global Macroeconomic Environment

We are currently experiencing a time of great global macroeconomic uncertainty. This uncertainty can cause unprecedented and dramatic shifts in consumer behavior, which can have significant effects on the mobile device industry. These effects could include, for example, consumers reducing the amount they are willing to spend on mobile products, which would negatively affect industry average selling prices, or consumers postponing purchases of new products, which would negatively affect device replacement cycles. These types of shifts in consumer behavior could potentially have a material adverse effect on our net sales and profitability in 2012.

While negative to the industry overall, we believe that the impact of any dramatic shifts in consumer behavior could be mitigated to a certain extent by our global distribution network, geographically well diversified supply-chain, relatively fragmented customer space and the breadth of our offering, which covers a wide range of price points. Furthermore, during our ongoing transition to Windows Phone as our primary smartphone platform our financial position has continued to be relatively strong. We continuously monitor the strength of our financial position and assess its adequacy in different net sales and profitability scenarios.

Additionally, we have identified and implemented certain precautionary measures designed to limit the possible immediate direct negative consequences resulting from the potential deterioration of the economic situation within the eurozone.

Restructuring in accordance with all that:

[F-64] In April 2011, Nokia announced plans to reduce its global workforce by about 4 000 employees by the end of 2012, as well as plans to consolidate the company’s research and product development sites so that each site has a clear role and mission. In September 2011, Nokia announced plans to take further actions to align its workforce and operations, which includes reductions in Sales and Marketing and Corporate functions in line with Nokia’s earlier announcement in April 2011. The measures also include the closure of Nokia’s manufacturing facility in Cluj, Romania, which – together with adjustments to supply chain operations – has affected approximately 2 200 employees. As a result, Devices & Services recognized a restructuring provision of EUR 456 million in total.

In 2010, Devices & Services recognized restructuring provisions of EUR 85 million mainly related to changes in Symbian Smartphones and Services organizations as well as certain corporate functions that were expected to result in a reduction of up to 1 800 employees globally.

[96] The factors and trends discussed above influence our net sales and gross profit potential. In addition, operational efficiency and cost control are important factors affecting our profitability and competitiveness. We continuously assess our cost structure and prioritize our investments. Our objective remains to maintain our strong capital structure, focus on profitability and cash flow and invest appropriately to innovate and grow in key strategic areas.

We expect that the adoption of Windows Phone as our primary smartphone platform will enable us to reduce significantly our operating expenses. For example, the Microsoft partnership allows us to eliminate certain research and development investments, particularly in operating systems and services, which we expect will result in lower overall research and development expenditures over the longer-term in our Devices & Services business.

We announced in 2011 that we are targeting to reduce our Devices & Services operating expenses by more than EUR 1 billion for the full year 2013, compared to the Devices & Services operating expenses of EUR 5.35 billion for the full year 2010, excluding special items and purchase price accounting related items.

We have announced a number of planned changes to our operations during 2011 and 2012 in connection with the implementation of our new strategy in our Devices & Services business and the creation of our new Location & Commerce business. The planned changes include substantial personnel reductions, site and facility closures and reconfiguration of certain facilities.

Initially, we announced that we are focusing our restructuring work primarily on the research and development teams to ensure that we correctly allocate resources for the new strategy at appropriate cost levels. In addition, we agreed to outsource our Symbian software development and support activities to Accenture, which resulted in the transfer of approximately 2 300 employees to Accenture.

We later announced that we are accelerating structural change in other parts of the organization in order to ensure that we are responsive to the changing dynamics in our industry. This phase includes the alignment of our markets organization and other supporting functions. For sales, this includes a move to simplify our model based around four regions, twenty areas and additional local offices that serve individual countries or territories.

We also announced plans to adjust our manufacturing capacity and renew our manufacturing strategy to reflect how our global networks of customers, partners and suppliers have evolved, including the closure of our facility in Cluj, Romania, the review of our manufacturing operations in Komárom, Hungary, Reynosa, Mexico and Salo, Finland and the transfer of smartphone assembly operations to Beijing, China and Masan, South Korea.

With respect to combining NAVTEQ and our Devices & Services social location services operations to form our Location & Commerce business, we announced a plan to capture potential synergies and opportunities to increase effectiveness through automation. The planned changes in the Location & Commerce business are estimated to affect approximately 1 300 employees.

Since we outlined our new strategy, we have announced total planned employee reductions of approximately 11 500 employees, as well as the transfer of approximately 2 300 employees to Accenture as noted above.

The planned measures support the execution of our strategy and are expected to bring efficiencies and speed to the organization. In line with our values, we are offering employees affected by the planned reductions a comprehensive support program. We remain committed to supporting employees and the local communities through this difficult change.

As of December 31, 2011, we had recognized cumulative net charges in Devices & Services of EUR 797 million related to restructuring activities in 2011, which included restructuring charges and associated impairments. While the total extent of the restructuring activities is still to be determined, we currently anticipate cumulative charges in Devices & Services of around EUR 900 million before the end of 2012. We also believe total cash outflows related to our Devices & Services restructuring activities will be below the level of the cumulative charges related to these restructuring activities.

In the past, our cost structure has benefited from the cost of components eroding more rapidly than the price of our mobile products. Recently, however, component cost erosion has been generally slowing, a trend that adversely affected our profitability in 2010 and 2011, and may do so in the future.

The currency volatility of the Japanese yen and United States dollar against the euro continued to put pressure on our costs in 2011. During 2011, we were able to manage the currency volatility driven cost pressure with an appropriate level of hedging and by managing our sourcing towards more favorable currencies. Our currency exposure profiles have not changed significantly and continued currency volatility of the Japanese yen and US dollar against the euro may negatively affect us in the future.

Location & Commerce:

[97] Our Location & Commerce business aims to positively differentiate its digital map data and location-based offerings from those of our competitors and create competitive business models for our customers.

In the fourth quarter 2011, we conducted our annual impairment testing to assess if events or changes in circumstances indicated that the carrying amount of our goodwill may not be recoverable. As a result, we recorded a charge to operating profit of EUR 1.1 billion for the impairment of goodwill in our Location & Commerce business. The impairment charge was the result of an evaluation of the projected financial performance of our Location & Commerce business. This took into consideration the market dynamics in digital map data and related location-based content markets, including our estimate of the market moving long-term from fee-based towards advertising-based models especially in some more mature markets. It also reflected recently announced results and related competitive factors in the local search and advertising market resulting in lower estimated growth prospects from our location-based assets integrated with different advertising platforms. After consideration of all relevant factors, we reduced the net sales projections for Location & Commerce which, in turn, reduced projected profitability and cash flows.

Location & Commerce’s resources are primarily focused on the development of:

(i) content, which involves the mapping of the physical world and places such as roads and points of interest, as well as the collection of activity data generated and authorized for use by our users;

(ii) the platform, which adds functionality on top of the content and includes the development tools for us and others to create on top of it; and

(iii) applications built on the content and platform.

Our Devices & Services business is a key customer of Location & Commerce. Devices & Services purchases map and application licenses from Location & Commerce for its Nokia Maps service sold in combination with GPS enabled smartphones.

Competition:

[61] With respect to digital map data and related location-based content, several global and local companies, as well as governmental and quasi-governmental agencies, are making more map data with improving coverage and content, and high quality, available free of charge or at lower prices. For example, our Location & Commerce business competes with Google which uses an advertising-based model allowing consumers to use its map data and related services in their products free of charge. Google has continued to leverage Google Maps as a differentiator for Android, bringing certain new features and functionality to that platform. Apple has also sought to strengthen its location assets and capabilities through targeted acquisitions and organic growth.

Location & Commerce also competes with companies such as TomTom, which licenses its map data and where competition is focused on the quality of the map data and pricing, and Open Street Map, which is a community-generated open source map available to users free of charge. Aerial, satellite and other location-based imagery is also becoming increasingly available and competitors are offering location-based products and services with the map data to both business customers and consumers in order to differentiate their offerings.

Strategy for the trend: Location-Based Products and Services Proliferation

[97] A substantial majority of Location & Commerce net sales in 2011 came from the licensing of digital map data and related location-based content and services for use in mobile devices, in-vehicle navigation systems, Internet applications, geographical information system applications and other location-based products and services. Location & Commerce’s success depends upon the rate at which consumers and businesses use location-based products and services. In recent years, there has been a strong increase in the availability of such products and services, particularly in mobile devices and online application stores for such devices. Furthermore, as the use of the Internet through mobile devices has been growing rapidly, the anchor of the Internet is moving from the desktops to mobiles. This shift is making location-based content a key element of most Internet experiences. We expect this trend to continue, but we also expect that the level of quality required for these products and services and the ability to charge license fees for the use of map data incorporated into such products and services may vary significantly. By combining our NAVTEQ business with our Devices & Services social location services operations, we believe our Location & Commerce business will be better positioned to capture emerging business opportunities with a broader offering which is no longer limited to digital map data.

Strategy for the trend: Increasing Importance of Creating an Ecosystem around Location-Based Services Offering

[97] Creating a winning ecosystem around our Location & Commerce’s services offering will be critical for the success of this business. The longer-term success of the Location & Commerce business will be determined by our ability to attract strategic partners and developers to support our ecosystem. Location & Commerce is aiming to support its ecosystem by enabling strategic partners and independent developers to foster innovation on top of their location platform. We believe that making it possible for other vendors to innovate on top of Location & Commerce’s high quality location-based assets will further strengthen the overall experience and make our offering stronger and more attractive.

Strategy for the trend: Emergence of the Intelligent Sensor Network

[98] Mobile Internet devices are increasingly being enabled with a rich set of sensors such as a GPS, a camera and an accelerometer which enable interaction with the real world. This interaction also enables the collection of large volumes of rich data which, when combined with analytics, enable the development of increasingly sophisticated, contextually-aware devices and services. We believe the combination of NAVTEQ with our Devices & Services social location services operations will enable Location & Commerce to participate in this industry development and seize new opportunities to deliver new experiences that bridge the virtual with the real world.

Strategy for the trend: Price Pressure for Navigable Map Data Increasing

[98] Location & Commerce’s net sales are also affected by the highly competitive pricing environment. Google is offering turn-by-turn navigation in many countries to its business customers and consumers on certain mobile handsets at no charge to the consumer. While we expect these offerings will increase the adoption of location-based services in the mobile handset industry, we also expect they may lead to additional price pressure from Location & Commerce’s business customers, including handset manufacturers, navigation application developers, wireless carriers and personal navigation device (“PND”) manufacturers, which are seeking ways to offer lower-cost or free turn-by-turn navigation to consumers. Turn-by-turn navigation solutions that are free to consumers on mobile devices may also put pressure on automotive OEMs and automotive navigation system manufacturers to have lower cost navigation alternatives. This price pressure is expected to result in an increased focus on advertising revenue as a way to supplement or replace license fees for map data.

In response to the pricing pressure, Location & Commerce focuses on offering a digital map database with superior quality, detail and coverage; providing value-added services to its customers such as distribution and technical services; enhancing and extending its product offering by adding additional content to its map database, such as 3D landmarks; and providing business customers with alternative business models that are less onerous to the business customer than those provided by competitors. Location & Commerce’s future results will also depend on Location & Commerce’s ability to adapt its business models to generate increasing amounts of advertising revenues from its map and other location-based content.

We believe that Location & Commerce’s PND customers will continue to face competitive pressure from smartphones and other mobile devices that now offer navigation, but that PNDs continue to offer a viable option for consumers based on the functionality, user interface, quality and overall ease of use.

Strategy for the trend: Quality and Richness of Location-Based Content and Services Will Continue to Increase

[98] Location & Commerce’s profitability is also driven by Location & Commerce’s expenses related to the development of its database and expansion. Location & Commerce’s development costs are comprised primarily of the purchase and licensing of source maps, employee compensation and thirdparty fees related to the construction, maintenance and delivery of its database.

In order to remain competitive and notwithstanding the price pressure discussed above, Location & Commerce will need to continue to expand the geographic scope of its map data, maintain the quality of its existing map data and add an increasing amount of new location-based content and services, as well as using innovative ways like crowd sourcing to collect data. The trends for such location-based content and services include real-time updates to location information, more dynamic information, such as traffic, weather, events and parking availability, and imagery consistent with the real world. We expect that these requirements will cause Location & Commerce’s map development expenses to continue to grow, although a number of productivity initiatives are underway designed to improve the efficiency of our database collection processing and delivery. In addition, we will need to continue making investments in this fast paced and innovative location-based content and services industry, for instance through research and development, licensing arrangements, acquiring businesses and technologies, recruiting specialized expertise and partnering with third parties.

Restructuring in accordance with all that:

[F-64] In September 2011, Nokia announced a plan to concentrate the development efforts of the Location & Commerce business in Berlin, Germany and Boston and Chicago in the U.S., and other supporting sites and plans to close its operations in Bonn, Germany and Malvern, U.S. As a result, Location & Commerce recognized a restructuring provision of EUR 25 million.

Nokia Siemens Networks:

[99] Nokia Siemens Networks’ has a broad portfolio of products and services designed to address evolving needs of network operators from GSM to LTE wireless standards, a base of over 600 customers in over 150 countries serving over 2.5 billion subscribers and one of the largest services organizations in the telecommunications infrastructure industry. The company’s global customer base includes network operators such as Bharti Airtel, China Mobile, Deutsche Telekom, France Telecom, Softbank, Telefonica O2, Verizon and Vodafone.

Geographical diversity provides Nokia Siemens Networks with opportunities in both emerging markets, which may experience rapid growth, and developed markets where it believes its technologically advanced products and services portfolio provides a competitive advantage, while the geographic diversity of its customer base reduces exposure to fluctuating economic conditions in individual markets.

Nokia Siemens Networks’ net sales depend on various developments in the global telecommunications infrastructure and related services market, such as network operator investments, the pricing environment and product mix. In developed markets, operator investments are primarily driven by capacity and coverage upgrades, which, in turn, are driven by greater usage of the networks primarily through the rapid growth in data usage. Those operators are targeting investments in technology and services that allow them to provide end users with fast and faultless network performance in the most efficient manner possible, allowing them to optimize their investment. Such developments are facilitated by the evolution of network technologies that promote greater efficiency and flexibility.

In addition, those operators are increasingly investing in software and services that provide them with the means to better manage end users on their network, and also allow them additional access to the value of the large amounts of subscriber data under their control. In emerging markets, the principal factors influencing operator investments are the continued growth in customer demand for telecommunications services, including data, as well as new subscriber growth. In many emerging markets, this continues to drive growth in network coverage and capacity requirements.

The telecommunications infrastructure market is characterized by intense competition and price erosion caused in part by the entry into the market of vendors from China, Huawei and ZTE, which have gained market share by leveraging their low cost advantage in tenders for customer contracts. In recent years, the technological capabilities of those vendors, particularly Huawei, has improved significantly, resulting in competition not only on price but also on quality.

The pricing environment remained intense in 2011. In particular, the wave of network modernization that has taken place, particularly in Europe but increasingly in other regions including Asia Pacific, has experienced some aggressive pricing as all vendors fight for market share.

Nokia Siemens Networks’ net sales are impacted by those pricing developments, which show some regional variation, and in particular by the balance between sales in developed and emerging markets. While price erosion is evident across most geographical markets, it continues to be particularly intense in a number of emerging markets where many operator customers have been subject to financial pressure, both through lack of availability of financing facilities during 2011 as well as profound pricing pressure in their domestic markets.

Pricing pressure is evident in the traditional products markets, in particular, where competitors may have products with similar technological capabilities, leading to commoditization in some areas. Nokia Siemens Networks’ ability to compete in those markets is determined by its ability to remain price competitive with its industry peers and it is therefore important for Nokia Siemens Networks to continue to reduce product costs to keep pace with price attrition. Nokia Siemens Networks continued to make progress in reducing product and procurement costs in 2011, and will need to continue to do so in order to provide its customers with high-quality products at competitive prices. There is currently less pricing sensitivity in the managed services market, where vendor selections are often largely determined by the level of trust and demonstrated capability in the field.

In November 2011, Nokia Siemens Networks articulated its regional strategy, identifying three markets, Japan, Korea and the United States, as its priority countries where it will target growth. The Middle East and Africa, where political, financial and competitive pressures have led to particular weakness in 2011, will be the focus of turnaround efforts. In the remaining regions, Latin America, China, Asia-Pacific, Canada and Europe, Nokia Siemens Networks goal will be to defend market share and find areas for future profitable growth.

Over recent years, the telecommunications infrastructure industry has entered a more mature phase characterized by the completion of the greenfield roll-outs of mobile and fixed network infrastructure across many markets, although this is further advanced in developed markets. Despite this, there is still a significant market for traditional network infrastructure products to meet coverage and capacity requirements, even as older technologies such as 2G are supplanted by 3G and LTE. As growth in traditional network products sales slows, there is an emphasis on the provision of network upgrades, often through software, as well as applications, such as billing, charging and subscriber management, and services, particularly the outsourcing of non-core activities to companies

The competitive landscape for that is the following:

[70] Conditions in the market for mobile and fixed network infrastructure and related services improved, but remained challenging and intensely competitive in 2011. The market continued to be characterized by mixed trends as growth in mobile broadband and services was offset by equipment price erosion, a maturing of legacy industry technology and intense price competition.

Industry participants have changed significantly in recent years. Substantial industry consolidation occurred in 2007 with the emergence of three major European vendors: Alcatel-Lucent, Ericsson and Nokia Siemens Networks. The break-up of Nortel occurred in 2009 when it entered bankruptcy protection and many parts of the business were sold, including the wireless carrier unit, Metro Ethernet Networks, and its GSM business. In January 2011, Motorola Solutions completed its separation from Motorola Mobility Holdings Inc. In April 2011, Nokia Siemens Networks acquired the majority of Motorola Solutions’ wireless network infrastructure assets.

During 2011, the competitive environment in the telecommunications infrastructure market was characterized by continued overall growth in global network operators’ capital expenditures in Euro terms, mainly attributable to the Japanese, Chinese, APAC, North East Europe and Latin American markets. Growth in capital expenditures declined in the Middle East and remained relatively unchanged in the European and North American markets in Euro terms in 2011. Increased smart phone usage drove increased investments in the United States and European wireless markets. The vendors from China, Huawei and ZTE, continued to grow their market share but at a slower pace than in previous years and continued to challenge Alcatel-Lucent, Ericsson and Nokia Siemens Networks. Nokia Siemens Networks’ ability to compete with low-cost vendors primarily depends on its ability to be price competitive and, in certain circumstances, its ability to provide or facilitate vendor financing. In recent years, the technological capabilities of the Chinese vendors, particularly Huawei, has improved significantly, resulting in competition not only on price but also on quality. In addition to the major infrastructure providers, Nokia Siemens Networks also competes with Cisco and NEC.

In the Networks Systems business, the decline of 2G (GSM, CDMA) continued in 2011, whereas investments in 3G continued and increased worldwide. Also, fourth generation (4G) LTE trials and pilots continued strongly as operators continued to merge towards next generation LTE and all-IP networks. Within the LTE segment, leading vendors are competing based on factors including technology innovation, network typology and less complex network architectures as well as integration towards all-IP networks.

Growth in wireline and wireless broadband services sped up optical and wireless network upgrades in developed markets. In addition, the related investment in mobile backhaul networks continued to increase due to data traffic increases in the operator networks.

In services, which remained the fastest growing part of the industry, competition is generally based on a vendor’s ability to identify and solve customer problems rather than their ability to supply equipment at a competitive price. Competition in services is from both traditional vendors such as Alcatel-Lucent, Ericsson and Huawei, as well as non-traditional telecommunications entities and system integrators, such as Accenture and IBM. In addition to these companies, there are also local service companies competing, which have a narrower scope in terms of served regions and business areas.

Nokia Siemens Networks’ Business Solutions business unit assists network operators in transforming their business, processes and systems to enhance the customer experience, drive new revenue and improve operational efficiency to enable them to successfully address the challenges and opportunities of mobile broadband, smartphones, tablet computers, multi-play offerings, service innovation and new growth areas. In this area, Nokia Siemens Networks faces competition also from information technology and software businesses like Accenture, Amdocs, HP, IBM and Oracle, which are active in areas such as the service delivery platform market and business insight and analysis services.

Certain competitors may receive governmental support allowing them to offer products and services at substantially lower prices. Further, in many regions restricted access to capital has caused network operators to reduce capital expenditure and has produced a stronger demand for vendor financing. Certain of Nokia Siemens Networks’ competitors may have stronger customer financing possibilities due to internal policies or government support. While the amount of financing Nokia Siemens Networks provided directly to its customers in 2011 remained at approximately the same level as in 2010, as a strategic market requirement it plans to offer this financing option only to a limited number of customers and primarily to arrange and facilitate such financing with the support of export credit or guarantee agencies.

Strategy for the trends in: Mobility and Data Usage

[100] Over recent years the two most evident trends in the telecommunications market – the rise in use of  mobile services and the exponential increase in data traffic – have converged. One result is that services once regarded as available primarily, if not exclusively, through fixed or wireline network are increasingly in demand from wireless networks also.

Alongside traditional voice and data services, such as text messaging, end-users access a wealth of media services through communications networks, including email and other business data; entertainment services, including games and music; visual media, including high definition films and television programming; and social media sites. End-users increasingly expect that such services are available to them everywhere, through both mobile and fixed networks, and a wealth of new devices, optimized to allow them to do so, have become available including tablet computers, highly sophisticated multimedia smartphones, mobile broadband data dongles, set-top boxes and mobile and fixed line telephones.

The widespread availability of devices has been matched by a proliferation of products and services in the market that both meet and feed end-user demand. These continue to drive dramatic increases in data traffic and signaling through both mobile access and transport networks that carry the potential to cause network congestion and complexity. During 2011, this increase continued to gain momentum as more users moved towards smartphones and tablets and even more devices that require constant connectivity were introduced to the market.

While the growth in traffic is clear, it has not been met by corresponding growth in operators’ revenues from data traffic, where growth appears to be slowing. This presents operators with a challenge: to cope with the growing traffic load within networks, it is fundamental that operators continue to invest in their networks, but within the financial constraints that their current business models dictate.

This means that while the addition of capacity, speed and coverage is crucial, it is critical that networks are built efficiently and effectively in a manner that optimizes capital investment and delivers networks with architecture sufficiently flexible to cope with evolving requirements.

During 2011, Nokia Siemens Networks recognized the centrality of mobile networks to the future development of telecommunications and announced that it would place mobile broadband at the heart of its strategy, articulating an ambition to provide the world’s most efficient mobile networks, the intelligence to maximize the value of those networks and the services capability to make all elements work together seamlessly. Nokia Siemens Networks said it expected to increase investment in mobile broadband.

Also during 2011, Nokia Siemens Networks launched the network architecture designed to equip operators to meet the challenges they are facing. “Liquid Net” architecture provides flexibility across networks to adapt to changing customer needs instantly, using existing resources more efficiently. This optimizes capital investment and allows operators to seek new revenue opportunities. Liquid Net uses automated, self-adapting broadband optimization to remain constantly aware of the network’s operational status, as well as the services and content being consumed, to ensure the best user experience. Liquid Net consists of three areas: Liquid Radio, Liquid Core and Liquid Transport.

Strategy for the trends in: Managed Services and Outsourcing

[101] There has been an acceleration in the development of the managed services market as operators increasingly look to outsource network management to infrastructure vendors. The primary driver for this trend is that managed services providers are able to offer economies of scale in network management that allow the vendor to manage such contracts profitably while operators can reduce the cost of network management. The outsourcing trend is also underpinned by many operators taking the view that network management is no longer either a core competence or requirement of their business and are increasingly confident they can find greater expertise by outsourcing this activity to a trusted partner that can also improve quality and reliability in the network.

Nokia Siemens Networks believes that this trend will continue and that it could in future be driven by financial imperatives of its customers facing slowing revenue growth but a continuing requirement for capital investment in their networks, a dynamic that has the potential to threaten their profitability levels. This results in some operators aiming to control their operating expenditure. In those circumstances, the outsourcing of the management of their network to infrastructure vendors, such as Nokia Siemens Networks, can be an attractive option.

In emerging markets, such as Africa and India, price pressure and competition in the end-user market has increased the financial pressure on many operators, which in turn has resulted in a similar trend as operators have looked to control and cut costs through outsourcing network management.

The trend towards network management outsourcing is evident in every region of the world and has intensified. Nokia Siemens Networks believes that this trend generates its own momentum in the market as vendors can increasingly demonstrate their capabilities with reference accounts and operators are exposed to their competitors taking steps that can enhance profitability and improve network quality and reliability.

In the announcement of its new strategy in November 2011, Nokia Siemens Networks reaffirmed its commitment to services, and will continue to aim to support mobile operators with high end services and will seek to maximize the potential of its global delivery model, with its global network solution centers in Portugal and India which offer the benefits of scale and efficiencies both to Nokia Siemens Networks and its customers.

Strategy for the trends in: Customer Experience Management

As operators in many markets see the growth of net new subscribers slowing or even stopping, they are increasingly focused on leveraging the value of the subscribers they have. As the acquisition of new subscribers to networks in such markets can be both difficult and expensive, customers look to limit “churn”, where end users transfer to a rival service provider, as well as to increase the revenue derived from each user through the addition of value-added services, such as access to media and entertainment and social networking services. This often requires that operators invest in software and solutions that allow customers to enjoy an improved experience. One of the key foundations for this improved end-user experience is understanding an end user’s behavior and preferences, which in turn allows the operator to tailor service offerings to the individual consumer. This not only includes services and applications, but also bespoke billing platforms and identity management solutions.

Nokia Siemens Networks continues to develop and enhance its offerings in this area, and in November 2011 announced that its Customer Experience Management unit would be a lead business area in its new strategy. Nokia Siemens Networks believes it has the industry’s leading subscriber database management platform, complemented by flexible billing and charging platforms and other software and solutions that provide its customers with the tools, flexibility and agility required to respond to a rapidly changing end-user market. Nokia Siemens Networks also provides business process and consulting services that help to lead its customers through business transformation opportunities.

Strategy related to: Motorola Solutions Acquisition

[102] In April 2011, Nokia Siemens Networks acquired the majority of the wireless network infrastructure assets of Motorola Solutions for a total consideration of EUR 642 million. The acquisition increased Nokia Siemens Networks’ global presence and expanded its position and product offerings in key markets. See Item 4B. “Business Overview – Nokia Siemens Networks – Motorola Solutions Acquisition.”

Trasition to a: New Strategy and [the corresponding] Restructuring Program

[103] Nokia Siemens Networks’ focus is on becoming the strongest, most innovative and highest quality mobile broadband and services business in the world. Rather than targeting the full spectrum of telecommunications equipment and services, Nokia Siemens Networks is the first of the telecommunications companies to refocus on providing the most efficient mobile networks, the intelligence that maximizes the value of those networks and the services that make it all work seamlessly.

In November 2011, Nokia Siemens Networks announced a new strategy, including changes to its organizational structure and an extensive restructuring program, aimed at maintaining and developing Nokia Siemens Networks, position as one of the leaders in mobile broadband and services and improving its competitiveness and profitability. Nokia Siemens Networks expects substantial charges related to this restructuring program in 2012. See Item 4B. “Business Overview—Nokia Siemens Networks—New Strategy and Restructuring Program” for a description of the main elements of the new strategy.

Year 2012 will be a year of transition for Nokia Siemens Networks as it implements its new strategy and restructuring program. Accordingly, Nokia and Nokia Siemens Networks believe it is currently not appropriate to provide annual targets for Nokia Siemens Networks for 2012. Additionally, the macroeconomic environment is making it increasingly difficult to estimate the outlook for 2012.

Longer-term, Nokia and Nokia Siemens Networks target Nokia Siemens Networks’ operating margin to be between 5% and 10%, excluding special items and purchase price accounting related items.

Nokia Siemens Networks targets to reduce its annualized operating expenses and production overheads, excluding special items and purchase price accounting related items, by EUR 1 billion by the end of 2013, compared to the end of 2011. While these savings are expected to come largely from organizational streamlining, the company will also target areas such as real estate, information technology, product and service procurement costs, overall general and administrative expenses and a significant reduction of suppliers in order to further lower costs and improve quality.

Nokia Siemens Networks plans to reduce its global workforce by approximately 17 000 by the end of 2013. These planned reductions are designed to align the company’s workforce with its new strategy as part of a range of productivity and efficiency measures. These planned measures are expected to include elimination of the company’s matrix organizational structure, site consolidation, transfer of activities to global delivery centers, consolidation of certain central functions, cost synergies from the integration of Motorola’s wireless assets, efficiencies in service operations and company-wide process simplification.

Nokia Siemens Networks has begun the process of engaging with employee representatives in accordance with country-specific legal requirements to find socially responsible means to address these reduction needs. Nokia Siemens Networks will continue to share information in affected countries as the process proceeds. In order to reduce the impact of the planned reductions, Nokia Siemens Networks intends to launch locally led programs at the most affected sites to provide re-training and re-employment support.