Taiwan handset makers originally expected to continue receiving orders for Lumia series products from Microsoft Mobile and also acquire new orders from Amazon and Facebook in 2014, but according to the latest upstream information acquired by Digitimes Research, Taiwan makers were not able to land orders from Amazon and Facebook as expected, and may even see their orders for Lumia-branded Windows Phones decrease.From the fourth quarter of 2013 to the first half of 2014, Compal Electronics and FIH Mobile, a subsidiary of the Foxconn Group, had both been talking with Amazon about cooperation and also received requests for quotation (RFQ) from the vendor.After more than half a year of negotiations, and Amazon even released its in-house designed Fire Phone, Amazon has not yet fully established its smartphone outsourcing plans, causing Compal and FIH Mobile to fail to land Amazon's smartphone ODM orders in 2014 as expected.In the second half of 2013, Facebook started cooperating with Compal Communications, which was still an independent company at the time, to outsource smartphone ODM orders. After Compal's merger with Compal Communications in the first half of 2014, and having shipped several thousands of entry-level Android smartphones to Facebook, Compal's cooperation with Facebook ended and the two firms have not had any other cooperation so far.As for Nokia's smartphone department, which was acquired by Microsoft and is now Microsoft Mobile, Taiwan's smartphone makers originally expected the vendor, which has support from Microsoft's enormous resources, to expand its ODM orders for Lumia series Windows Phone in 2014, but instead the vendor has been cutting Taiwan makers' ODM orders since the third quarter of 2014, fully terminating smartphone and tablet projects that have not yet entered mass production, as it has turned to focus on business reorganization and cost reductions.Digitimes Research believes Taiwan smartphone makers' ODM orders from Microsoft Mobile, Facebook and Amazon will need to wait until the second quarter of 2015 or even the second half of 2015 to have a chance to see improvements.

Samsung Electronics and Lenovo have recently started a wave of price cuts for their tablets in the US market. Samsung offered price cuts for its 7- and 10-inch models, but their prices are still higher than those of its competitors. Lenovo reduced the price of its 8- and 10-inch entry-level tablets, further enhancing the devices' competitiveness in the market. Lenovo's 10-inch 16GB model is now priced below US$180.Meanwhile, Asustek Computer's T100 and Acer's Switch 10 2-in-1s are seeing their prices gap narrow.For the US' 7-inch 8GB tablet market segment, to counter its significant shipment drop in the second quarter, Samsung, in August, reduced the retail price of its 7-inch Galaxy Tab 3 7.0 Lite from US$149 to US$139, decreasing its price gap with other competitors' mainstream devices to only around US$10. Samsung also reduced its 7-inch Galaxy Tab 4 7.0 from US$199 to US$179, but the price point is still over US$30 more expensive than similar-level devices from competitors, Digitimes Research found.Asustek joined the US' 7-inch 8GB tablet market segment with its US$129 entry-level ME170C. However, compared to Asustek's ME176C released in early June, the ME170C has inferior processor, panel, storage and version of Android, but their price gap is only about US$20, making the ME170C weaker in price/performance ratio than the ME176C.Meanwhile, Lenovo's 7-inch 8GB tablet, the A7-40 has adopted MediaTek's quad-core solution, but is only priced around US$129. Digitimes Research believes first-tier vendors are trying to preserve as much profit as possible before competition during peak season starts.Currently, tablet players that are most aggressive over pricing are second-tier vendors that are using solutions from China's supply chain. Hewlett-Packard (HP)'s 7 Plus tablet, which uses a chip solution from China-based Allwinner Technology and is assembled by China-based Neostra, is currently priced below US$100. Toshiba's Excite Go tablet, using Intel's China Tech Ecosystem (CTE) solution is also priced at US$99.

Several companies, and their related new wearable device concepts, have finished fund raising using the Kickstarter platform, with these devices being split into two major categories: devices that can help users sleep - such as NeuroOn, Aurora and Sense; and devices that can alert users to fatigue - such as Spark and Vigo. Digitimes Research believes these wearable devices will gradually replace existing bulky and expensive sleep-based medical devices and trigger more sleep-related application ideas in the future.Throughout July 2014 Kickstarter featured several new sleep-related wearable devices, most of which were able to meet or surpass their funding requirements on Kickstarter. The devices promoted DIY services and user-friendly functions for monitoring sleep patterns, and have overall attracted no shortage of consumer interest, indicating that demand for such products is high in places such as North America. Amid such developments, US-based National Sleep Foundation and the Consumer Electronics Association (CEA) have now solidified new standards and protocol for such sleep-related products to follow.In terms of devices shaping these trends that can help users sleep, NeuroOn is equipped with the most advanced features, including brain wave and muscle tension measurements with an overall emphasis on Polyphasic Sleep, while Sense is more price competitive and geared toward activity tracker functionality and environment monitoring. Aurora's focus meanwhile is on Lucid Dreams and how humans can further their understanding with them.There are also fatigue measurement devices such as Spark, which is meant to detect the body dozing off and send alarms to wake the person. Vigo also is equipped with similar features and also recommends users when they should rest.Given the wide range of products now available to users and that many industry experts estimate 1/5 of people suffer from sleep problems, such devices are expected to continue growing in markets across the globe and will also spur demand for new wearable devices related to health as well as sleep improvement and health monitoring in the future, Digitimes Research believes.

Although global notebook shipments are seeing less impact from tablets, PC shipments in the second half of 2014 are still expected to suffer an on-year drop, which will cause DRAM module shipments to drop 20% on year in 2014, according to Digitimes Research.Additionally, bit demand for DRAM chips from PC vendors and DRAM module makers has reduced significantly due to rapidly rising DRAM chip prices resulting from a fire at the Wuxi plant of SK Hynix in 2013 and the absence of capacity ramps by major suppliers.Affected by declining PC and DRAM module shipments as well as slowing bit growth in DRAM chips for discrete PC systems, the global bit-growth rate of standard DRAM chips is expected to edge up only 2.7% in 2014, the lowest growth rate since 2010, Digitimes Research estimated.The bit-growth rate of DRAM chips for desktops will grow the highest at 12.7% on year in 2014, while the rate of bit-growth for notebook DRAM will increase 1.8%. However, demand from the DRAM module sector will decline 14.6% from a year earlier.

Because telecom carriers in China have sharply reduced subsidies to smartphone purchasing, China-based smartphone vendors, which used to cooperate tightly with telecom carriers and adopted a strategy of flooding the market with multiple smartphone models, are turning to marketing through retail and online channels, significantly reducing the number of smartphone models customized specifically for telecom carriers, according to Digitimes Research's recent findings.Digitimes Research expects Huawei, Lenovo, CoolPad and ZTE, the four major China-based smartphone players, to see the telecoms account for less than 50% of their overall shipment volumes in 2014.Since June 2014, China has adopted a new taxation policy for the telecom industry. Depending on services provided, carriers are required to pay an 11% tax for basic telecommunication services, plus a 6% tax for value-added services, higher than a combined 3% business tax they had to pay for all services. The policy change caused telecom carriers to suffer 20-30% of operation profit drops.China telecom carriers used to offer consumers free handsets if they pre-paid their fees. But under the new taxation policy, carriers are no longer able evade value-added taxes by designating such free handsets as gifts to customers. Many of the carriers' plans now instead offer free talk time for customers who purchase handsets.In addition, China's state-owned Assets Supervision and Administration Commission of the State Council in early July demanded telecom carriers reduce their marketing budgets by 20% for three years and the carriers' budgets for handset subsidies are expected to shrink as a result and the numbers of models receiving subsidies will be greatly reduced.In the past, users' strong demand for changing to 3G handset models and carriers' aggressive subsidies for new handset purchases resulted in Huawei, Lenovo, CoolPad and ZTE supplying 70% of their handsets to telecom carriers.However, following the telecom carriers' reductions in subsidies for entry-level handset models in May 2013, which caused a subsenquent pile-up, harsh payment terms and slim profits have been reducing smartphone vendors' willingness to cooperate with telecom carriers in China.China-based smartphone vendors Gionee, BBK and Oppo are mainly focusing on the retail channel in order to see stable growth in their sales and profits. On the other hand, Xiaomi is expanding its smartphone business through the online sales, creating a popular business model that has sent other vendors following suit by their phones online.Digitimes Research expects China handset players' combined sales through retail and online channels to account for over 50% of China's handset shipments in the second half of 2014. However, as the market is approaching saturation, and products only have limited differentiation, China's handset market is expected to continue seeing fierce price competition and declining profits.

Nearly 70% of LCD monitors sold in August 2014 in the markets of US, UK, Germany, Japan and China, were equipped with HDMI/DisplayPort technology, up 7.5pp on year, according to Digitimes Research.The proportion of 23-inch units sold that come equipped with the technology has increased from 64.9% in August 2012 to 74.2% in August 2013 and then to 75.9% in August 2014. The increase largely comes from vendors focusing on the release of 23-inch units that also come equipped with touch technology.The global proportion of 24-inch HDMI/DisplayPort units meanwhile dipped on year in 2013 but has increased from 61.4% in 2013 to 86.8% in 2014, driven mostly by new mid-range and high-end units released by Samsung Electronics.Digitimes Research also noted the global proportion of 22-inch HDMI/DisplayPort units increased from 50.7% in August 2013 to 63.9% in August 2014, mainly due to new 22-inch units launched from Dell and IIYAMA.

Aiming at becoming the world's second largest system IC producer in 2025, Korea has mapped out a seven-point development project to develop related IC products, including core architecture of application processors, power management (PWM) ICs, SoC (system on chip) solutions and integrated software, according to Digitimes Research.Among the seven points, the development of core AP architecture and PWM ICs is more difficult due to keen international competition, but Korea may optimize the advantage of its six major industries to develop its integrated software and SoC products.During the period from 2014-2013, Korea aims to develop integrated embedded software, SoC solutions and related platforms for automobile, aviation, robot, shipbuilding, electronics and medicare industries.Taking the development of driverless car for instance, Korea will first focus on the development of control software for distance, speed and direction discriminants, and then SoCs for sensing, proximity and control algorithm before moving into the development of self-driving platforms and other solutions.For the development an IP (intellectual property) bank, Korea will facilitate the exchange of semiconductor and software IP products through the Korea IP Exchange center (KIPEX) to help reduce semiconductor and software R&D expenses, while offering a better environment for software and SoC developments. The Korea government will also push Samsung Electronics to step up its cooperation with small- and medium-size IC design houses at least on four RFIC products.

Japan Display's (JDI) WQHD panel technology is furthering its way into the high-end panel segment, most notably in China, where high-end panel demand is continuing to grow. JDI has not only improved production capabilities, but has also expanded its business model through cooperation with its subsidiary Taiwan Display (TDI), and has decided to make Star World Technology Corporation (STC), a Taiwan-based manufacturer of LCD modules (LCMs), into a subsidiary of TDI by acquiring approximately 80% of STC's outstanding common shares. Digitimes Research believes these factors will give JDI major advantages in China's small- to medium-size high-end panel segment and will increase services that meet diverse customer needs in addition to enhancing its cost competitiveness. JDI is already starting to show signs of emerging in the China market, with sales to customers in China increasing 2.4 times on year during the second quarter of 2014. The company also expects its revenues for 2014 to reach JPY750 billion (US$7.2 billion). Digitimes Research added that consumers can expect to see a new wave of handsets featuring JDI's WQHD panel technology hit the market in the fourth quarter of 2014. The technology will make up 60% of the company's overall handset panel revenues in the fourth quarter, up three-fold on year. The company's Pixel Eyes technology meanwhile is expected to make up 20% of JDI's sales during the quarter and that proportion will increase to 40% in the first quarter of 2015.

Shipments of 64-bit application processors (APs) are expected to start gaining momentum in the second half of 2014 due to combined efforts by chipmakers, system providers as well as the support from Google, according to Digitimes Research.Qualcomm has begun shipping 64-bit APs for smartphone applications with end-market devices built on these APs likely to hit the market in the third quarter. Meanwhile, MediaTek will begin large-volume shipments soon, positioning its 64-bit parts at the same levels as those of Qualcomm's but with more competitive prices.Shipments of Intel's x86-based 64-bit processors for tablet applications will also grow significantly in the second half, buoyed by its proper marketing strategy. MediaTek's shipments of tablet APs will also perform strongly due to its flexible policy, while Nvidia will begin to ramp up shipments of its Tegra K1 processors in the third quarter.Meanwhile, Allwinner Technology and Actions Semiconductor are expected to roll out their respective 64-bit solutions before the end of 2014, Digitimes Research estimated.

Sales of handsets in the India market reached 61.07 million units in the first quarter of 2014, with smartphones accounting for 17.59 million units or 28.8%. Notably, smartphone sales showed a 186% on-year growth in the first quarter compared to a 31% growth recorded in China, indicating rising growth momentum in India, according to IDC. The market research firm expects smartphone sales in India to top 80.57 million units in 2014, with a CAGR of over 40% in the next five years.Despite booming sales, a total of 78% of smartphones sold in India are tagged below US$200. Meanwhile, local brands are emerging as major players, with Micromax, Karbonn and Lava taking a 15%, 10% and 6% share, respectively, to serve as the second, third and fourth largest vendors in India, trailing after only Samsung Electronics (35%). Under such circumstances, is there room for Taiwan-based handset vendors or related handset component suppliers to make further deployments in India? Digitimes president Colley Hwang met with Micromax co-founder Rajesh Agarwal to discuss this issue and gain insights about the India market.Q: Could you talk about the major milestones for your companies in the past few years as well as your strategies for the future?A: Micromax started from scratch to become the top handset vendor within just a few years. We shipped 25 million handsets in 2013 and expect to sell 40 million units in 2014. Give us some more time we will have an opportunity to enter the world's top-10 vendors list.In the market place, Micromax has become a well-known brand in India and tends to also become the best platform for foreign products to use as a channel in the India market. We believe that any solutions available worldwide can make an entrance into the India market through Micromax's sales channels, and Micromax also does not confine itself to the handset business.Q: Could you also talk about the current status of India's handset market, and what are the strategies being adopted by Micromax to approach the market?A: We currently import about three million handsets a month from China, accounting for a significant portion of the monthly imports of 21 million handsets by India on the whole. Not only consumers are sensitive to pricing, the ever-declining ASPs have also continued to mount pressure on handset vendors. Micromax's ASP for handsets stood at US$60-70 in 2013 and is expected to drop to around US$55 in 2014.Q: China-based brand Xiaomi Technology has just made inroads into India. How do you assess the competitive pressure that China-based brands will bring into the India market?A: Xiaomi indeed has come out aggressively, but China is China and India is India, as social and cultural conditions of the two nations are not identical. For example, channel operators in India seldom leverage online marketing, and after-sale service support networks are one of the major advantages local brands have. The hunger marketing used by Xiaomi in China is not necessarily applicable in India. Micromax will win over Xiaomi in India as we have the ability to compete effectively with Samsung.Micromax posted revenues of US$1.2 billion in 2013 and is likely to ramp up its revenues to US$2.0 billion in 2014. To meet market demand more flexibly, Micromax has also been trying to manufacture handsets in-house. We are now importing SKD products from abroad for production of up to 600,000 units of mobile devices a month. We aim to control more value from production processes and we are also assessing the value to be generated from other segments, such as online networks and software.Micromax will focus on four strategic segments: Internet, handsets, smart TVs and LED products. The Internet is everywhere, whether it is for marketing or rendering value-added services. Micromax will pay strong attention to any online services which are instrumental to its business expansion and will look for proper opportunities to participate in these businesses.For the handset business, as we have been the number one local brand in India, we certainly will continue to optimize this advantage. Micromax has not only continued to deepen its deployments in India but we have also moved aggressively into neighboring countries including Bangladesh and Sri Lanka. Micromax now serves as the second largest handset vendor in these two countries. In addition to markets in South Asia, we are also looking for opportunities to make inroads into the Russia market, and also aim to hold a comprehensive advantage in emerging markets.Micromax believes that smart TVs serve as a key element in building a complete IT industry ecosystem. We will look for cooperation partners in the smart TV sector, and Taiwan-based makers may serve as the best partners. Micromax plans to go to public in 2015 and thus we will have more room to seek cooperation partners prior to being listed. Of course, we will be a worthy partner for Taiwan-based companies to approach for cooperation talks. While we believe that Taiwan could be the best partner for us, we do not yet have the whole picture regarding to how strong the ambition Taiwan's companies have for building up a handset supply chain in India.Micromax has held cooperation talks with a number of Taiwan-based companies including BenQ, but nothing has been ever finalized. A lack of in-depth understanding of each side has made the previous industry meetings empty talks. But now since the market environment has become more mature, companies from Taiwan and India may be able to find a new cooperation model.Micromax headquarters in Gurgaon, IndiaPhoto: Colley Hwang, Digitimes, August 2014Micromax co-founder Rajesh AgarwalPhoto: Colley Hwang, Digitimes, August, 2014