Bux, I thought you might enjoy the following post dated June 6 from Gus at the IDCC club board at RB. He was laughing about China Unicom and the Q. An utterly rabid Q-hater without a clue. Even though I have him on "ignore", it's my pleasure to serve him a helping of crow:
More reality. If China Unicom did not push through with CDMAOne despite the fact that they went out of their way to use CCF financing to set-up 4 test CDMAOne networks over the last TWO years, what makes anyone think that they're going to adopt CDMA2000 in 3 years? LOL. Furthermore, TD-SCDMA, which is being harmonized with the Nokia/IDC version as chronicled by IQ, aligns China with the global de facto upgrade path and positions them to take a more important role in shaping 4G, befitting its projected status as the 2nd largest consumer of ICs (2nd only to the US) by the year 2010.
If China uses cdma2000, Qualcomm's next-generation standard, the company stands to gain the most. If China uses another version of the technology, called WCDMA, Qualcomm might receive less in royalties because European companies also claim to hold patents, although the legal battles haven't yet begun.
June 7, 2000
Qualcomm Tries New China Strategy;
Firm Focuses On Local CDMA Output
By MATT FORNEY and PUI-WING TAM
Staff Reporters of THE WALL STREET JOURNAL
After losing a lucrative deal to supply off-the-shelf cellular-phone technology to China, Qualcomm Corp. is mapping out a new strategy to
sell next-generation products in the world's fastest-growing mobile-phone market.
That strategy involves greater emphasis on technology transfer and local production. Observers cite the lack of progress in those areas as a factor behind Qualcomm's most recent problems in the country.
China announced Sunday that it won't buy "narrow-band" code-division multiple access, or CDMA, technology from Qualcomm. The decision means China's current mobile-phone network, which had 30 million subscribers at the end of last year and is growing by a million or more subscribers a month, will use only GSM technology popular in Europe. That is a setback for U.S. trade policy, which had made a priority of pushing CDMA in China, and for the San Diego-based company in its
battle with European firms for telecommunications supremacy.
"This takes Qualcomm out of the game for the next few years, and that's a long time to be out of the game," says Mark Cabi, a elecommunications analyst at Credit Suisse First Boston. "The perception for the company's growth is now gone."
As news of China's plans leaked out over the past few months, the company's stock has tumbled, falling by two-thirds since January. Tuesday
morning, shares rose 2%, or $1.3125, to $68.5625. Says Christopher McHugh, a senior portfolio manager at Turner Investment Partners, which has sold its stake in Qualcomm, the China announcement "is a big psychological negative."
Now, the company is hoping to stanch these losses by pushing local production of CDMA equipment -- a key demand of Chinese bureaucrats eager to develop their country's mobile-phone industry. "We're working closely with Chinese manufacturers to transfer CDMA technology to
them," says Steve Altman, a company vice president, adding that "we have approximately 70 to 75 licensees."
[Typical QCOM spin/FUD. Unfortunately, China needs more factories and jobs to give them more headroom in dealing with their inefficient state-owned enterprises. Motorola, for example, just announced plans to set up a $1.9 semiconductor plan (embedded devices) in China. QCOM is light years away.]
Qualcomm's failure to convince China that it would build enough products locally helped doom its plans to build narrow-band CDMA, the kind of
technology currently in use in the U.S. and a handful of other countries. As of now, no Chinese companies can build reliable handsets, base stations and other equipment using CDMA.
If Qualcomm had started earlier building closer ties to Chinese companies able to make CDMA equipment, the government might not have nixed its
February agreement, say people familiar with Qualcomm's negotiations. "Unicom [China United Telecommunications Corp.] did not have in place a
localization plan so that in two or three years time it would no longer have to import billions of dollars of CDMA equipment," says a Western
diplomat.
Unicom, China's state-owned second phone company, said Sunday it won't build a current-generation mobile-phone network using CDMA, but will use Qualcomm's technology in the future. If Unicom follows through, Qualcomm still stands to make money -- the company hopes to have its
next-generation product ready by the end of the year, but it is unlikely that Unicom will begin using it so quickly.
Qualcomm was anxious for Unicom to deploy its current narrow-band product because countries are likely to upgrade to new technologies more
slowly than expected. "Qualcomm thinks narrow-band will have a longer life span in many parts of the world, and it can't be pleased that
narrow-band has been frozen out of China," says Peter Cowhey, a professor at the University of California at San Diego and a former adviser
to Qualcomm's chairman, Irwin Jacobs.
Eventually, though, China will almost certainly use some form of CDMA technology. If China uses cdma2000, Qualcomm's next-generation standard, the company stands to gain the most. If China uses another version of the technology, called WCDMA, Qualcomm might receive less in royalties because European companies also claim to hold patents, although the legal battles haven't yet begun.
In a sign that the government is considering using Qualcomm's products in the future, it has asked Chinese telecommunications equipment makers to provide an update on their progress in building advanced mobile-phone networks, including Qualcomm's cdma2000.
Write to Matt Forney at matt.forney@wsj.com and Pui-Wing Tam at pui-wing.tam@wsj.com
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