Qualcomm?s Chinese Fortune
By Peggy Albright
Winds are blowing every which way among the factions interested in China United Telecommunications Corp.?s intent to
deploy a new CDMA network in the world?s largest market.
Each new bit of news brings differing interpretations and stirs up speculation about the future of CDMA beyond the United
States and South Korea. The recent spin frequently has been unfavorable, either for Qualcomm or for operators wanting to
build the market for cdmaOne and its evolutionary technologies.
The problems began in late May when word got out that Unicom?s registration statement for its upcoming IPO did not highlight
the planned CDMA side of its business, despite its hyped agreement with CDMA pioneer Qualcomm to deploy cdmaOne and
its evolutionary technologies, 1XRTT and cdma2000.
The situation then worsened as Unicom executives began their roadshow to encourage investment in the company during its
forthcoming IPO. Various media reports indicated that the presentations focused more on plans to deploy GSM than plans to
push cdmaOne. Others reported the opposite, asserting that Unicom still plans to deploy CDMA.
The conflicting reports followed separate news that the South Korean operators no longer would subsidize handsets, which
could adversely affect Qualcomm?s revenue stream. The string of events caused Qualcomm?s stock price to bounce up and
down like a yo-yo.
But the company still holds that it has a deal with Unicom, says spokeswoman Christine Trimble.
Moe Grzelakowski, senior vice president and general manager for strategic marketing in Motorola?s network solutions sector,
also says she expects the deal to go through.
?Our current understanding is they are still going [with] CDMA,? she says.
Motorola already works extensively with Unicom, supplying the operator with GSM technology for its current operations. As a
provider of both GSM and CDMA technologies, Grzelakowski says her company will give Unicom whatever technology it
chooses. Motorola already has a CDMA foot in the door in China, with an IS-95 (cdmaOne) network it is building for Great
Wall Telecom.
The whole rigmarole over the state of Qualcomm?s contract shows how difficult it is to do business with China, says industry
analyst Herschel Shosteck. The continuing delays reflect the ongoing struggle for political power in that country, he says.
Today, most wireless customers in China use government-endorsed GSM technology provided by the current monopoly,
China Telecom. Both companies operate under the control of the Ministry of Information Industry, or MII. China Unicom was
established in the mid-1990s to compete with China Telecom but has struggled since being absorbed by MII.
Qualcomm first announced the deal with Unicom in February. According to the original deal, Unicom agreed to deploy a
CDMA network with the capacity to serve 10 million customers within this calendar year. The deal ensured that Chinese
manufacturers would purchase their application specific integrated chips from Qualcomm as long as Qualcomm?s ASICs are
competitive in price and function with others on the market.
But as time goes by, CDMA?s future in that country is less and less certain, Shosteck believes.
?The longer that this goes on, that the uncertainty continues, the less likely it is that the CDMA project will come to full fruition,?
he says. Failure for CDMA to succeed there could cause an adverse domino effect and thwart potentially favorable cdma2000
markets in Japan, Korea and even Brazil, he says.
?It is not impossible that these would all cascade as people desert cdma2000, not because it?s a bad technology but because
of issues of technology maturation and economies of scale,? he says.
That situation would push operators to the competing option, wideband-CDMA. With companies bidding in European auctions
favoring W-CDMA, and if China Unicom doesn?t go CDMA, companies taking the W-CDMA route for 3G will benefit from
the economy of scale that choice offers, Motorola?s Grzelakowski says.
At the same time, CDMA could encounter cost disadvantages as the post-1XRTT narrowband market splits between
Qualcomm?s High Data Rate technology or the Motorola and Nokia technology, called 1EXTREME.
For CDMA, it all adds up to a forecast for continued breezes and possibly more stormy weather.
Wireless Week |
