China and Standards
With 2G and GSM, China adopted, but was technologically incapable of participating in its development. Foreign vendors reaped, and continue to reap, the lion's share of capital growth from 2G build out in China. Ericsson and Nokia build plants in China, but an indigenous China GSM manufacturing base does not exist to this day.
China has stated convincingly that they are not satisfied with this pattern, and that they intend to focus on internal research, development and production. They also understand, after following for so long, that active participation in establishing Standards is fundamental to realizing commercial advantages on the world stage.
What of wCDMA? Is it possible, no, realistic that China can contribute significant, fundamental intellectual property to the evolving wCDMA standard? Is it even possible, in a timely fashion, for China to develop wCDMA components - in light of Samsung’s stated timetable of 2-3 years development to achieve the same goal, in light of Samsung's superior mastery of CDMA?
If China adopts wCDMA for 3G, history will repeat itself. China will again be at the disadvantage of requiring foreign vendors to design and manufacture their technology. They will again pay more for technology they did not participate in developing. Technology will move too fast to catch up, and the prospect of a truly indigenous research, development and manufacturing base will be lost - simply more splitting the spoils with Nokia and Ericsson.
What options does China have to be a real player in 3G?
With Siemens, China has developed TD-SCDMA. 3GPP (the GSM dominated Standards organization) has agreed that TD-SCDMA can be harmonized with the TDMA flavor (of 3) presently proposed for IMT-2000. Harmonized simply means compatible - the two separate entities could coexist and communicate. There would be no melding of technology at the genetic level. TD-SCDMA could be widely applied in China (is this the gamble Siemens is playing?) but the odds of it being applied elsewhere are nil. However, research is at a comparatively early stage, and its development in a timely manner in question. With implementation limited to China, economies of scale would be a greater challenge. Also there would be no prospect of a royalty stream from outside of China.
Within 3GPP2, (the QCOM dominated Standards organization) an extraordinary thing is happening. For CDMA2000 next generation 1x EV-DV standards, China will contribute significant, fundamental intellectual property to the evolving standard. This is happening now. Right now, in WorkingGroup 5. The evolving standard is both ANSI-41 and GSM Map compliant - making it an appropriate Standard for upgrading existing GSM systems.
China is exceedingly motivated to speed this process - as can be gleaned from correspondence in this post - Message 14488506
What does this mean for China?
*) China will be part "owner" in CDMA2000 Standards.
*) China will realize a royalty stream worldwide when Operators upgrade to CDMA2000. When Sprint and Verizon upgrade, China will make money. When Korean Operators upgrade in existing spectrum, China will make money. If China can influence the application of CDMA2000 in Korea for 3G spectrum, China will make more money. If China can influence the application of CDMA2000 in Japan for 3G spectrum, China will make even more money.
*) Suffice to say China would have the strongest incentive to encourage the global application of CDMA2000.
*) China will part-own a Standard that is equally appropriate as wCDMA for upgrading its GSM systems - that will provide a royalty advantage over other standards and provide its indigenous manufacturing base an advantage over foreign vendors - even superior CDMA vendors like Samsung and SK Telecom.
This profound development smells of a larger framework and a larger relationship between China and QCOM:
*) In return for Inviting China into the Standards Club, and the opportunity to participate in the 3G royalty stream, and enjoy the resulting home court advantage internally, China will use 1x EV-DV for GSM upgrades. No wCDMA in China.
*) For those who disagree, please state what motivates QCOM to offer China this gift of profound magnitude. It is not for need of China’s technology. And China will use a CDMA flavor regardless - it's only a matter of time.
As noted previously, China is most anxious to conclude the Standards integration. I suspect that China would prefer locking their Standards contribution in prior to announcing their imminent CDMA build out. This will not be possible as the technology mix for 1x EV-DV, which was supposed to be resolved by May 2001, will unfortunately be pushed back (in part due to LU's late submission - China(CWTS) and MOT are well along in bringing their submissions together) - and China simply cannot continue to postpone technology development. It's curious that QCOM does not have a submission for 1x EV-DV as well - until you remember that they own the foundation technology <gggggggg>.
MOT and LU, having presented proposals for inclusion as well, will, in all probability, participate in the royalty stream. Small price to get them on board - as it will not effect QClassics 5%. Perhaps they and China add a few % points to CDMA royalty costs - still far less than projected wCDMA royalties.
Globally, what will no wCDMA in China mean? It will mean that GSM’s "big lie" (repeat something often enough and people will believe) that "wCDMA will inevitably dominate" looses certainty - if not credibility.
Add all of this Standards intrigue to recent statements and activities by China politicians, manufacturers and vendors - and China looks like Qualcomm Country.
a good evening - ben |
