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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Mike Buckley who wrote (28806)7/26/2000 10:39:17 AM
From: rushnomore  Read Replies (1) of 54805
 
re QCOM, Spinco

If CDMA-based ASICs really are no different in that they are as readily substitutable as all other ASICs, then it's equally important that we recognize that the ASICs portion of Spincom's business model is a royalty game, not a gorilla game.

Mike, Jerry: I have had a lot of experience in electronic circuit design, but not much with ASICs specifically. Many times I have found that it was difficult if not impossible to find a "ready substitute" integrated circuit (IC) for an IC in an existing design, for example when the original IC was discontinued by the manufacturer or was in short supply. The costs involved in switching to a substitute IC which was not exactly like the original were substantial. As another example, the Macintosh computers use ASICs which are essential to the personality and the hardware and software compatibility of the system. No other manufacturer can readily build a Mac-like computer without essentially duplicating those ASICs. Apple controls the ASIC designs.

However, I don't think that TRFM (p. 55) is talking about that kind of substitution. Moore says about ASICs "They are changed typically with each new generation of the product." Similarly with disk drives and web browsers. Applying this observation to the cell phone business, It appears to me that if Spinco cross-licenses with other chip manufacturers then cell phone manufacturers could make successful cell phone designs with CDMA ASICs from any of several chip manufacturers. The various cell phones would have different features, and some might work better than the others.

My opinion is that Spinco will be in a royalty game with respect to CDMA chips.
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