MOBILE DEVICE ACCESSORIES - VDC Research

VDC Research GroupMobile and Wireless PracticeAn Executive BriefMOBILE DEVICE ACCESSORIESGlobal Market Demand AnalysisPrepared by:Casey Holmes, AnalystDavid Krebs, DirectorMobile and Wireless PracticeVDC Research GroupJune 2007All rights reserved

A White Paper on: MOBILE DEVICE ACCESSORIES 3Exhibit 2Worldwide Shipment Forecast for Mobile Device AccessoriesDollar Volume (In Millions)2006 Total: $5886.3 MillionHeadset1600.3Cases/HolstersWireless CardsChargers723.4795.4926.7Power Packs/Additional Batteries567.2Port Replicators/Docking StationsCablesNotebook MiceHandheld/PDA CradlesHandheld/PDA Bar Code ScannersRugged Vehicle Mounting SystemsInput Technologies375.9235.5220.7157.0124.099.960.20 400 800 1200 1600 2000Mobile Accessories Market for Rugged Mobile Devices• The mobile accessories market for rugged mobile devices in 2006 was $880.1 million and isestimated to grow 12.7% over the next five years to reach $1,602.1 million. The mobileaccessory market for rugged devices differs widely from its commercial brethren by its overallgreater contribution to total rugged market revenues and the tight control that rugged mobiledevice vendors have over the industry.• The accessories market around rugged mobile devices contains far fewer players than thecommercial-grade accessories marketplace. Most accessories are manufactured by therugged mobile device vendors themselves or by third-party accessory vendors who work withthe device vendors through partner certification programs.• VDC estimated that for every dollar spent on a rugged mobile device, 26 cents is spent on amobile accessory – in comparison to the approximately 3 cents per dollar spent on acommercial-grade mobile device. Such high sales are due to vendor’s close relationshipswith their customers, high price points, and overall importance of accessories to the solution.• Recognizing the opportunity in mobile accessories, rugged mobile device vendors haveshifted accessories from an afterthought to a key part of their product roadmaps. The resulthas been better designs, focused marketing, and enhanced customer education about how toproperly accessorize a solution. Currently, VDC estimates that rugged mobile device vendorshold approximately three-quarters of this mobile accessories market.

A White Paper on: MOBILE DEVICE ACCESSORIES 4• Although the rugged mobile device vendors have stepped up their role in accessories, theirdominance of the market will eventually be challenged as new market entrants look tocapture share and currently fragmented third party accessories vendors start to consolidate.Rugged mobile device vendors should also be weary of large commercial-grade accessoryvendors looking to expand into profitable niche markets.End User and Channel AnalysisVDC surveyed end users in both the consumer and enterprise/government spaces to learn about thereasoning behind purchasing an accessory. VDC also surveyed various members of the channelincluding distributors, VARs, SIs, retailers, and carriers in order to discover leading channel factorsaround accessories including profit margins and accessory manufacturer selection criteria. A sample oftwo of the many important findings is included below.Exhibit 3Product Considerations for Mobile Devices vs. Mobile Accessories(Percentage of Respondents)Mobile Device Average Mobile Accessories AverageQuality 63.0% 46.8%Reliability 60.0% 39.4%Price 57.5% 54.4%Product Features 57.0% 20.7%Ease of Use 48.5% 24.6%Bluetooth Capabilities 39.0% 16.0%Size 33.5% 11.1%Product Specifications 31.5% 11.0%Weight 31.5% 10.1%Customization 28.5% 4.1%Ruggedness 26.0% 14.3%Ergonomic Design 16.5% 7.3%Ease of Installation 15.0% 15.1%Bundled with a Mobile Device 13.5% 12.9%Color 9.5% 6.3%Styling 7.5% 4.0%Exhibit 4Average Revenue, Growth Rate, and Gross Margin Estimations(Percentage of Channel Respondents)Revenue Generated by Mobile Accessories 16.3%Predicted Growth Rate in Mobile Accessory Sales for 2007 9.1%Current Gross Margins from the Sale of Mobile Accessories 26.6%Target Gross Margins from the Sale of Mobile Accessories 26.9%

A White Paper on: MOBILE DEVICE ACCESSORIES 5Increasing Importance of Channel Relationships• Increasing competition from Asian-based manufacturers of generic accessories havethreatened American- and European-based manufacturers’ market share. Beyond revampingproduct lines and decreasing manufacturing costs, major mobile accessories vendors areexpanding their channel relationships deeper into traditional channels and across to moreunique outlets.• Major mobile accessories vendors are establishing closer relationships with mobile devicevendors through Partner Certification Programs and OEM projects in order to gain insight intomobile device vendors’ road maps. The hope is to gain a leading edge on the market byreleasing new accessories at the same time as a new device.• The increasing contribution of consumer sales to the mobile accessories market is pushing awave of personalization. Vendors are designing more colorful and stylish accessories thanever before to meet this demand. This trend is opening up new channels of sales such asclothing department stores to sell accessories to consumers.• E-tailers are gaining credibility as important outlets for the mobile accessory market. Althoughthey account for only a small portion of sales today, their contribution is growing. Internetsales over mobile accessories vendors’ Web sites are also increasing. Many manufacturers,particularly in the rugged segment, are choosing to place links to their distributor’s Web siteinstead of selling directly to end users in order to maintain loyalty.• Rugged mobile device vendors have come to rely heavily on specialized integrators in orderto successfully implement accessories designed around new technologies such as RFID andmobile payment.Competitive AnalysisLow cost to enter combined with high-profit margins has made the industry incredibly competitive andsaturated with players. Key third-party accessory vendors who lead across several industries includedTargus, Belkin, and Kensington. Leading mobile device manufacturers each have a large impact onaccessories sales within their respective spaces.Key Success RequirementsWhile the mobile accessories market is expected to become a stronger revenue source for the mobilityindustry, it does not guarantee the success of everyone on the market.The following are key success requirements based on VDC research:1. Having a strong focus on the company’s current role in the industry and the company’s direction inthe future.2. The ability to differentiate products through added features, creative form factors, or lower prices.3. Creating and maintaining relationships with every part of the distribution chain in order for the productto reach the customer.

A White Paper on: MOBILE DEVICE ACCESSORIES 6ABOUT THE STUDYMobile Device Accessories: Global Market Demand Analysis is a new study from VDC Research Group’sMobile and Wireless Practice. The report measures the aftermarket mobile device accessories market,comprised of accessories for commercial-grade and rugged form factor products including notebooks,tablet PCs, handheld PDAs, and smartphones. VDC designed this study to be used as a decision supporttool for product and market development managers at companies that manufacture or resell mobiledevices and accessories.Product Categories• Bluetooth Headset• Corded Headset• Case• Rugged Handheld/ PDA Holster• WAN Card• GPS Adapter• Bluetooth Adapter• Replacement Charger• Car Charger• Power Packs/ Additional Batteries• Desktop Port Replicator/ DockingStation• Rugged Vehicle Port Replicator/Docking Station• USB/Serial Cable• DEX Cable• Wireless Notebook Mouse• Corded Mini Mouse• Rugged Handheld/ PDA Cradle• Corded Rugged Handheld/ PDAScanner• Bluetooth Rugged Handheld/ PDAScanner• Rugged Vehicle Mounts• Keypad• Mobile Keyboard• Plug-in Magnetic Strip Readers• Smart Card Readers• Plug-in RFID ReaderGeographic RegionsDistribution Channel• Americas• EMEA (Europe, Middle East, Africa)• Asia-Pacific• Supplier Sales:• Direct to End User/OEM• Dealers/Distributors• VARs/SIs• Retail/CarriersReport StatisticsDate Published: 6/2007 Price: $6,450Total Pages: 194 Total Exhibits: 192Profiled Companies: 22 Market Forecast Coverage: 2006-2011User Survey Sample: 109 Vendor Survey Sample: 69

An Executive Brief, MOBILE DEVICE ACCESSORIES 7ABOUT VDCVDC Research Group (VDC) is an independent technology market research and strategy consulting firmthat specializes in a number of retail automation, RFID, AIDC, embedded, component, industrial, anddefense markets. VDC has been operating since 1971, when the firm was founded by graduates of theHarvard Business School and Massachusetts Institute of Technology. Today, we employ a talentedcollection of analysts and consultants who offer a rare combination of expertise in the market researchprocess; experience in technology product and program management; and formal training in engineeringand marketing. VDC’s clients include thousands of the largest and fastest-growing technology suppliers inthe world and the most successful investors participating in the markets we cover.For further information about Mobile Device Accessories: Global Market Demand Analysis, contact:Casey Holmes, Analyst, Mobile and Wireless Practice, 508.653.9000 ext. 134,cholmes@vdcresearch.comFor purchasing information, contact:Gerrald Smith, Account Executive, 508.653.9000 ext. 113, gmith@vdcresearch.comVDC RESEARCH GROUP679 Worcester Road | Suite 2 | Natick, MA 01760T: 508.653.9000 | F: 508.653.9836 | E:info@vdcresearch.com | W: www.vdcresearch.com