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Mobile connection

Increased percentage share of software for mobile telephony developed by manufacturers of handsets in Brazil

060-061_Celular_192_5Gabriel Bitar and Nana LahózBrazil ended 2011 with 242.2 million cell phone subscribers, or an average of 123 cell phones per group of 100 inhabitants – i.e., more than one cell phone per Brazilian. The increase in relation to the end of the previous year was 39.3 million phones. During the same period, the production of cell phone handsets in Brazil amounted to 64 million units, of which 7.2 million were exported. These figures make Brazil one of the most buoyant and coveted cell phone markets in the world, the fifth country in the global ranking of cell phone contracts. However, very few people know that Brazil also has impressive figures when it comes to technological innovation in connection with mobile telephone services.

The main cell phone manufacturers with operations in Brazil, such as Nokia, Motorola, Sony Ericsson, Samsung and LG, have research and development (R&D) centers and invest millions of dollars every year to create innovative solutions that will become a feature of models sold in Brazil and in the rest of the world. Handsets that have recently been turned into miniature personal computers with the possibility of internet access, reading e-mails, and GPS, in addition to receiving radio and digital TV signals.

For the most part the innovations developed in Brazil are linked to software, applications, production systems and trials of the products that companies are bringing in to the country, but there is also a very substantial volume of local production, often in conjunction with independent institutes such as Recife’s Center for Studies and Advanced Systems (Cesar), in the State of Pernambuco, the Venturus – Technological Innovation Center, in the city of Campinas (SP), and the Eldorado Institute, which has units in Campinas, Porto Alegre (RS) and Brasília.

Although he regards the investments in R&D made in Brazil by cell phone manufacturers as important, the researcher Rodrigo Abdala Figueiras de Sousa, from the Office of Innovation, Regulation and Infrastructure Studies and Sector Policies of the Institute of Applied Economic Research (Ipea), says that the so-called radical innovations, which result in the development of new products, the transformation of technology and the creation of value for the company and the country do not take place in Brazil. “A survey that is to be published this year will show that Brazil does not take part in the global preparation of information and communication technologies,” states Sousa.

Technological highlights developed in Brazil are few, but some of them are gaining space and visibility abroad, such as the MotoDev platform, aimed at the development of applications to be used with Android, the operating system developed by Google that is gaining increasing acceptance for handsets that have just come off the production line. The system was developed by the Eldorado Institute in partnership with Motorola, an alliance that dates back to the late 1990s, when the institute was responsible for coordinating the company’s technological training program.

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“MotoDev is an open platform that is free, and it is used worldwide. Last year it was recognized as the most user-friendly application at Eclipse Com 2011, an international conference on open-source tools for software, held by Canada’s Eclipse Foundation. This award helped project us internationally,” says Loiberto Ararigboia Verwiebe, an architecture and systems manager at the Eldorado Institute. He explains that the institution’s focus is on software development for cell phone operating systems and that, in addition to Motorola, projects have also been undertaken in partnership with Samsung.

In 2011, Eldorado won the Finep (Studies and Projects Finance Agency) Award for Innovation, which is a competition organized by Finep for companies and research institutions that invest in innovation. The institute entered six projects in the IT and Telecom areas which had been developed by its Campinas unit, including Acesso Fácil (Easy Access), a digital content distribution platform that enables the sending of applications, games and books, along with audio and video files, to any device that is connected to the internet. The main distinguishing feature in relation to its competitors is its ability to recognize the device that it is connected to, whether it is a cell phone, a tablet, a notebook, a TV or any piece of equipment, distributing content comptatible with each device’s technology. “Acesso Fácil began to be developed in 2010 and was created to be used in the distribution of content to cell phones,” declares Verwiebe.

A good example of an application for cell phones that was developed in Brazil and that has already become international is Track Id, which was created by Venturus in partnership with Sony Ericsson. This company was a joint-venture between Japan’s Sony Corporation and Sweden’s Ericsson, which has since been scrapped, with the company starting to display the Sony brand only in October 2011. Track Id is an application for the recognition of songs based on a small sample recorded on the handset or by taking the cell phone close to the electronic equipment that is playing music or even the cell phone’s own radio. The sample is then sent to a server with more than 2.5 million songs available which is constantly updated. The server replies to the user giving the name of the song, the singer and album, along with the artist’s or band’s biography and most famous songs.

Based at the Campinas’ High Technology Complex II, Venturus has been, since 2003, a strategic partner of Sony Ericsson, which has R&D centers in Sweden, China, Japan, and the United States. “We are regarded as their research center in Brazil, even though we are a partner institute. The applications that we develop for Sony Ericsson have the same level of complexity as those produced at the company’s other global research centers,” stresses Marcelo Abreu, the program manager for the client Sony Ericsson at Venturus. “We have three lines of software research: global applications, which are the partnership’s star products, as well as software prototypes and product development for Brazilian firms that are Sony Ericsson partners.”

Another product developed for Sony Ericsson was the user support, which enables the owner of the cell phone to interact with the handset and to learn its functions alone. Fully equipped with videos, tutorials, tips and information, it was designed to replace the hard-copy user manual. “We began the development of these two applications from scratch and nowadays they are integrated into all the cell phones that are produced throughout the world by the company,” says Abreu.

The institute has a total of 160 employees, 40 of whom work exclusively on the cell phone manufacturer’s projects. Every three months, the research center holds in-house workshops internally to discuss and propose possible innovations for Sony Ericsson. “We have an application that resulted from one of these workshops; it has been approved and is in the development stage. It should be launched in the middle of this year, but we are not at liberty at this time to reveal what it relates to,” declares the Venturus manager.

A song-recognition application, based on a small sample recorded with the cell phone handset

Gabriel Bitar and Nana LahózA song-recognition application, based on a small sample recorded with the cell phone handsetGabriel Bitar and Nana Lahóz

Another recent application developed in Brazil that is already in many cell Nokia brand handsets is the Facelock application, which recognizes the face of the handset’s owner and automatically unblocks the phone. Basically, the application compares two images, one which was previously stored in the handset – of the owner of the cell phone – with another captured by the camera at the front of the handset. “This application won the Nokia World 2010 competition and is now being used worldwide,” says André Erthal, director of the service experiments area at INdT – Instituto Nokia de Tecnologia (Nokia Technology Institute), the company’s research center that has branches in the cities of Manaus (in the State of Amazonas), Brasília, Recife (in the State of Pernambuco) and São Paulo.

“We are Nokia’s main technological arm in Latin America. Our greatest strength is developing personalized innovations for the Brazilian and Latin-American consumer. We have made various software innovations, but we have also created a lot of hardware and network technology,” states Erthal. Another cell phone application created by this institution was Ginga Mobile (Ginga-NCL), a program that allows users to gain access to the same digital TV service as is found on televisions, with interactivity on the cell phone.

The functions of the research centers of the companies manufacturing handsets or related firms also include trials of the resistance and durability of the handsets. For example, the Nokia Institute developed the Drop Tester, a piece of equipment used to test handsets. Patented in partnership with the city of Manaus’ Foundation Center for Analysis, Research and Technological Innovation (Fucapi), the device has been adopted by Nokia’s other global research centers.

Also in the trials area, INdT developed Brazil’s first colorimetry of displays and LEDs laboratory in Brazil. Named the Disco Lab, it is linked to the National Institute of Metrology, Standardization and Industrial Quality (Inmetro) and is fully equipped to carry out reliability trials of chromatic, luminescence and contrast response (among other parameters), used in cell phones and monitors of up to 17 inches.

Motorola was one of the pioneers in the installation of an inspection and integration center of software trials for cell phones in Brazil, the Brazil Test Center, which was set up in 2004. “This Project consolidated all the stages of the process and revolutionized how we look at cell phone trials. We have created tools, disciplines and processes that are used in a number of countries where the company is active,” says Rosana Fernandes, Motorola’s director of R&D. At present, the manufacturer has roughly 400 people who work exclusively on R&D in Brazil, including employees and researchers at partner institutions. In August 2011, Motorola’s cell phone division was sold to Google.

Brazil is potentially an open market for radical telephony innovation to be developed here

Gabriel Bitar and Nana LahózBrazil is potentially an open market for radical telephony innovation to be developed hereGabriel Bitar and Nana Lahóz

The establishment of the Brazil Test Center was carried out in partnership with Recife’s Center for Studies and Advanced Systems (Cesar), a research center that has partnered Motorola’s in a number of applications for the company. “We work with a design methodology that is centered on the user. When we receive a request from the manufacturer, we go out into the field and carry out a social and physical study of the consumer in order to understand his needs and desires. With the results of this study in our hands, we then develop the cell phone applications, produce a prototype, check it with end-users and, finally, implement the technology,” explains Eduardo Peixoto, Cesar’s chief executive.

Motorola is also one of the few companies that went as far as drawing up hardware projects, or conceiving a cell phone handset in Brazil. The first, which involved the development of both hardware and software, was the C353 that was launched in 2003, and was sold in Brazil and exported to all of Latin America. In 2008, it was the turn of the MotoroKR W6 model, created by the company’s R&D Center in Jaguariúna (SP). This cell phone was also exported to Latin America, as well as to China.

The company launched another handset conceived in the country at the end of 2010: Spice, the first smart phone with the Android operating system designed and produced in Brazil. “We coordinated the development of this handset at the global level,” explains Rosana. Motorola was the first major manufacturer to set up a structure to conduct cell phone R&D. In 1998, the company launched a technological training program that involved 17 universities and laid the foundations for the creation of mobile applications in Brazil. During the four years that it lasted, the program renewed 20 laboratories and trained 8,200 IT professionals.

“A that time there were very few trained professionals, so our first task was to work with universities and research to create competence in this area, training professionals and setting up laboratories,” declares Rosana. During this initial stage, the company invested R$ 23 million in the course of four years. From 1998 to 2011, investments increased. Total R&D investments in new software, applications, components and hardware for cell phones in Brazil amounted to more than US$ 500 million, or an average of roughly US$ 36 million a year.

Substantial investments have been made in Brazil by a few multinationals, but relative to their global R&D spending the amounts are still small. Motorola’s R&D spending in 2010 was US$ 1.5 billion while its global sales of cell phones and tablets alone amounted to US$ 11.5 billion. The company does not publish regional figures. Another global corporation, Samsung, posted sales of US$ 137 billion in 2010 for its entire portfolio of electronic goods, including cell phones, TVs and cameras, with Brazil accounting for US$ 5 billion of the total. Out of this total, US$ 20 billion were invested in R&D, R$ 100 million of which was in Brazil, according to an article in the newspaper Brasil Econômico, on October 21, 2011.

To promote R&D in Brazil, the path that companies have taken has been to set up partnerships with universities, an option that has also been used by Nokia’s INdT. The institute is equipped with three international level laboratories and has maintained a technical-scientific cooperation program with the Federal University of Amazonas (Ufam) for the last three years. Its aim is to create knowledge for the development of technologies for mobile telephony platforms in the region. The program’s students have already created and published more than 10 programs in Nokia’s applications store, Ovi Loja.

According to Erthal, from INdT, Brazil is potentially an open market for radical innovation in the area of mobile telephony to be developed here. “The Drop Tester is one example of innovation. For such innovations to become more frequent and more numerous, Brazil must encourage more people to become PhDs. Investing in critical mass is an essential step for the country to become increasingly innovative,” he states.

According to some analysts, for Brazil to advance on this front, it must update its IT Law. Companies set up in Brazil take advantage of this law to conduct R&D at their research centers or in partnerships with universities and research institutes. Enacted in 1991, during the Collor administration, the IT Law provided an incentive for innovation in Brazil, in the form of a tax break (an 80% cut in IPI excise taxes) to producers of a wide range of electronic products, including handsets, but on the other hand it requires that the company invest 4% of the invoicing generated by products benefitting from these tax breaks in R&D of the products in Brazil.

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“Since, in practice, the IT Law reduced the end price of the products covered by the incentives, at some point or another, all handset manufacturers in Brazil have decided to invest in R&D. Otherwise, their products won’t be competitive,” states Rodrigo Sousa, from Ipea, the author of the article “Twenty years of the Information Technology Law: are we on the right track?”, was published in the October 2011 edition of the aforementioned institute’s newsletter, Boletim Radar.

According to him, the IT Law, which turned 20 years old in 2011, is outdated. “There hasn’t been any substantial change in this law in the last two decades. It emphasizes hardware and doesn’t encourage the creation of software and components. As a result, all that Brazil does is assemble equipment.”

As far as he is concerned, the government should demand something in exchange from the multinationals, such as increased production of radical innovation for the global market, a higher level of exports, incorporation of new elements in the production chain, such as applications and components, and product diversification. Sousa argues that the law has distorted the market, causing it to focus on assembly, and stresses that the manufacturers set up their R&D centers in accordance with the country’s technological tradition. “For Brazil to turn into a platform for the generation and export of telecom and mobile telephony innovations, the country has to have a specific scientific and technological development policy,” says Sousa.

For Loiberto Verwiebe, from the Eldorado Institute, the innovation chain in regard to cell phones is growing in Brazil and a large number of applications has already been created locally for these mobile handsets. However, according to him, since there is an average delay in the launch of new handset models in Brazil of six to twelve months, there is little chance of developing applications linked to an innovative handset. “This does not prevent us from using the creativity of our developers to produce applications that are very important for the consumer market,” stresses Verwiebe. He also emphasizes that the hardware development teams for mobile handsets are concentrated mainly in China and South Korea.

“These countries have created a network of developers, consisting of ODMs (original design manufacturers), who produce the cell phones for the manufacturers. The product’s concept and design is done in the United States and in Europe, but its development is carried out in China,” he says. This may well explain why there are far fewer hardware innovations in Brazil than there are in the field of applications and software. “The number of Brazilian patents in this sector is insignificant. We adopt technologies developed in other countries,” points out Sousa, from Ipea.

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