Some details on last week's TXN/Dot deal....plus Nokia/Qualcomm.
techweb.com
Qualcomm, TI Vie For 3G CDMA Position
(07/05/00, 11:59 a.m. ET) By Darrell Dunn and Bruce Gain, Electronic Buyers' News
Two heavy hitters in the cell phone chip market are trading punches, with Qualcomm scoring a design win with longtime Texas Instruments 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 (stock: TXN) is the clear leader in the cell handset market, with more than a 60 percent market share, San Diego-based Qualcomm (stock: QCOMM) has a huge lead in CDMA technology, supplying about 85 percent of the CDMA chip sets shipped this year, according to industry analysts. Finland's Nokia (stock: NOK) recently chose to outsource a portion of its CDMA-handset manufacturing to Telson Electronics, a wireless OEM in Seoul, South Korea, that currently buys its CDMA chip sets from Qualcomm.
Under the agreement, Nokia will design and market second-generation CDMA handsets in South Korea, with Telson manufacturing the handsets using Qualcomm's chip sets. 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, San Diego, a supplier of software and transceiver technologies for CDMA.
The acquisition is the first clear indication of how Dallas-based TI plans to achieve compatibility with emerging air-interface protocols for 3G cellular handsets, and is perhaps designed to forestall efforts by Qualcomm, San Diego, to leapfrog TI during the transition to 3G technologies.
Nokia and Ericsson 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 (stock: MOT) both have similar-volume chip shipments. Last month at the Embedded Processor Forum, Motorola's Semiconductor Products Sector announced a 3G-handset chip set based on its StarCore DSP.
TI has agreements with Nokia, Ericsson, and Sony (stock: SNE) for use of its Open Multimedia Application Platform, which is based on a chip set 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, W-CDMA, and cdma2000.
Nokia's defection to Qualcomm, even if limited, could be significant if the chip set 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, 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 South Korean manufacturing and adopt the Qualcomm chip set 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 South 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 chip set. 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. Dot Wireless has extremely strong CDMA 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, 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 |
