Wild and Crazy Handset Market Looking to Hook-Up -- Literally

This morning there was the news that NEC, Casio, and Hitachi are tying the electrician's knot and creating a single handset division owned by the group -- well, in a polyamorous commune type of way. They hope to create more oomph in a market that has seen a few big winners and many not-so-big runners up. It shouldn't be a surprise because this is the result of powerful and ongoing market forces.

According to JMP Securities analyst Samuel Wilson, 2010 is going to be the year of the shakeout among handset manufacturers, at least in the smartphone category. But if you think about it, the pressures on lower-end handsets is even heavier. It's an odd market, where the carriers become the gatekeeper to the consumer. Although some number of handsets go directly into consumers' hands, generally a person only gets the device when signing on for some kind of service contract. It's a big reason why Palm has failed to gain as much traction for the Pre line as it would have liked, because partner Sprint has fallen behind AT&T and Verizon.

Even with the diversity you can find among smaller carriers, the real chance for handset unit movement rests with the biggies in any given region, and that limits the number of device vendors that can have significant success. It's one of the rare times I think that the equation between consolidation and market success is true beyond the arithmetic of bulk. It's not just that consolidation becomes a self-fulfilling prophesy, but that the market dynamics cannot support the greater number of electronics manufacturers.

Illustration via stock.xchng user xymonau, site standard license.