Qualcomm, TI vie for position -- Seek upper hand in emerging 3G CDMA
market
FRIDAY, JUNE 30, 2000 11:42:00 PM EST
Jun. 30, 2000 (Electronic Buyers News - CMP via COMTEX) -- DALLAS
- Two heavy hitters in the cell-phone chip market are trading punches, with
Qualcomm Inc. scoring a design win with longtime Texas Instruments Inc.
customer Nokia, and TI reaching into its deep pockets to complete an
acquisition that is expected to provide the company with CDMA technology
required for emerging third-generation (3G) systems.
The actions come as the cell-phone market begins to slowly move to
3G-handset technologies that offer increased bandwidth to support new
value-added services.
While TI is the clear leader in the cell-handset market with more than a 60%
market share, San Diego-based Qualcomm has a huge lead in Code Division
Multiple Access technology, supplying about 85% of the CDMA chipsets
shipped this year, according to industry analysts.
Finland's Nokia recently chose to outsource a portion of its CDMA-handset
manufacturing to Telson Electronics, a wireless OEM in Seoul, Korea, that
currently buys its CDMA chipsets from Qualcomm.
Under terms of the agreement, Nokia will design and market
second-generation CDMA handsets in Korea, with Telson manufacturing the
handsets using Qualcomm's chipsets. The handsets are expected to be on the
market in the first quarter of 2001, and may eventually serve other markets in
Asia, and perhaps in the United States and Israel, a Nokia spokesperson said.
In what it said was an unrelated announcement, TI plans a stock-based
acquisition valued at about $475 million of Dot Wireless Inc., a supplier of
software and transceiver technologies for CDMA.
The acquisition is the first clear indication of how TI plans to achieve
compatibility with emerging air-interface protocols for 3G cellular handsets,
and is perhaps designed to forestall efforts by Qualcomm to leapfrog TI during
the transition to 3G technologies.
Nokia and Ericsson LM are the world's No. 1 and No. 3 handset
manufacturers, respectively, and have made up the core of TI's leading
position in that market. Qualcomm and Motorola Inc. both have
similar-volume chip shipments. Last month at the Embedded Processor
Forum, Motorola's Semiconductor Products Sector announced a 3G-handset
chipset based on its StarCore DSP.
TI has agreements with Nokia, Ericsson, and Sony Corp. for use of its Open
Multimedia Application Platform, which is based on a chipset that integrates
the company's TMS320C55x and an ARM RISC processor in 3G systems.
But it has been unclear how TI would gain access to technologies allowing it to
transfer its capabilities to emerging 3G air interfaces such as CDMA,
Wideband-CDMA (W-CDMA), and cdma2000.
Nokia's defection to Qualcomm, even if limited, could be significant if the
chipset market is redefined during the market transition to 3G, analysts said.
"It's now clear that Nokia is willing to work with Qualcomm, and has broken
the ice on that front," said David Heger, an analyst at A.G. Edwards & Sons
Inc. in St. Louis. "While there's certainly a significant revenue opportunity for
Qualcomm in the near term, in the longer term, Nokia may be open to buying
Qualcomm chips for other markets."
Nokia's move to outsource its Korean manufacturing and adopt the
Qualcomm chipset was made in the interest of speed in getting its handsets to
market, according to Larry Pulson, vice president of Nokia's CDMA
product-line management in Seoul.
"We had a lot to accomplish on our end in CDMA, and we thought a partner
would be a simple way for us to approach the handset business in Korea,"
Pulson said. "But we're taking parallel-path activities through organic growth to
develop our own CDMA technology."
Bob Carl, manager of TI's Wireless Computing Business unit, downplayed the
significance of Nokia's decision in Korea, but acknowledged the company
does have ground to make up in the CDMA market.
"It's a spot deal for a spot market," Carl said. "Nokia is having a phone design
built for them, and Telson is a current user of the Qualcomm chipset. ... We
haven't historically done a lot in CDMA, and felt the best way to address it
was through acquisition.
"We wanted to be able to service all markets and our entire customer base
with a product line that goes across all different standards," he said. "Dot
Wireless has extremely strong CMDA expertise, and they've been focused on
the cdma2000 arena. We've been focusing on the underlying technology, but
really W-CDMA."
The Dot Wireless acquisition will not ensure TI the kind of success in 3G
systems that it has experienced in earlier-generation handsets, but customers
now have a definitive understanding of what TI is planning to accomplish, said
Will Strauss, an analyst at Forward Concepts Co., Tempe, Ariz.
"CDMA is the one place where TI has not been a strong participant," Strauss
said. "This [acquisition] certainly fills that gap. They're going to make sure they
can provide a complete solution regardless of what happens in the market. The
key thing they got is the software. Let's face it, software sells silicon."
Two or more high-bandwidth air interfaces are expected to emerge worldwide
for 3G handsets. The two main protocols currently being implemented are
cdma2000 and W-CDMA. Although EDGE is considered a 2.5G technology,
the protocol is capable of handling the general packet radio system, which
transports data over a GSM-standard network at speeds of up to 115
Kbits/s, accomplishing much of what is promised with 3G alternatives.
The market is littered with companies attempting to carve out a piece of the
3G-chip market, as analysts project the cell-phone business to grow from
about 435 million units shipped this year to nearly a billion in 2003.
A number of companies have announced 3G-chip offerings, including Infineon,
LSI Logic, Motorola, Philips Semiconductors, and PrairieComm. Intel Corp.
entered into its joint DSP development with Analog Devices Inc. specifically
with an eye on the 3G market. Lucent Technologies Inc.'s Microelectronics
Group has announced a 3G infrastructure chip, and is expected to make a bid
for the handset market as well.
Although 3G systems are expected to be deployed in Japan and other Asian
countries as early as next year, availability in Europe could trail by a year, and
in the United States by two years or more, according to analysts.
"The market's not here yet, but a lot of things are happening," Strauss said.
"Everyone's trying to jockey for position. It's clear now that TI is not going to
let the grass grow under its feet, but the fact is there are new entrants coming
along, and it's going to be very tough for TI to hold on to 60% of the market."
Deployment of CDMA worldwide will also run into political and geographic
hurdles in the next few years, Strauss said.
"It's not always just what's technically right, but what's politically correct," he
said. "What's politically correct in Europe may not be politically correct in the
U.S. or Japan or some other region."
Qualcomm warned last week that it may post lower-than-expected sales for
its fiscal fourth quarter, which ends Sept. 30, due to a cancellation by the
Korean government of subsidies to local telephone service providers.
"The company will evaluate potential offsetting factors, such as the introduction
of carrier marketing programs in Korea, increased export activity to other
worldwide markets, and the rapid deployment of CMDA networks," the
company said.
Qualcomm also announced last week that it will be laying off about 200
employees, according to the Associated Press. The company claimed the
layoffs were needed to streamline its operations and were not related to the
expected decline of handset sales in Korea because of the Korean
government's decision to end phone-industry subsidies.
No further layoffs are immediately planned, according to Qualcomm
spokeswoman Christine Trimble.
ebnonline.com
By: Darrell Dunn and Bruce Gain Copyright 2000 CMP Media Inc.
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