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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Mike Buckley who wrote (28806)7/25/2000 7:19:57 PM
From: sditto  Read Replies (4) of 54805
 
<<The ASIC category is in the lower, right corner, meaning ASIC have proprietary architecture but low switching costs. Due to the latter, ASICs producers don't typically play a gorilla game.>>

It's a misnomer to refer to Spinco simply as an ASIC manufacturer. If you take a look at the MSM chipset diagram Eric L. provided me last week from qualcomm.com. you will indeed see a CDMA ASIC. However, the ASIC is surrounded by other chips glued together by software to create an open proprietary architecture for a 3G cell phone. Although some handset manufacturers will undoubtedly want to buy just CDMA ASICs (subjecting Spinco to an ASIC-to-ASIC substitution threat at some later date) Spinco must focus on selling the entire MSM chipset (which will have much higher switching costs due to its additional functionality and integration points) to other manufacturers.

One of the more exciting things I heard on the conference call was the QCOM emphasis on providing investment and intellectual capital for creating a "virtuous cycle" of value added applications and services to ride the Spinco platform - in the process creating BTEs for competitors and SCs for customers. If played right, this becomes the wireless equivalent of the MSFT/INTC dynamic duo we've hoped for. The bad news is QCOM is behind in that game. The good news is the move to CDMA 2000 could give them an early proving ground where their expertise combined with the availability of high speed data links could provide some enduring first mover advantages.
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