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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 173.96+1.4%Nov 11 3:59 PM EST
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To: Stock Farmer who wrote (124971)10/30/2002 9:14:52 PM
From: kech  Read Replies (1) of 152472
 
Good post John. I agree with everything you said and it is important to watch for this scenario very carefully. It has played out just as you say in many industries. There was a Forbes article recently on China saying that many companies got involved with China thinking of the China Market - 2 billion feet for Nike etc - but eventually they all came around using China as a production platform to flood the rest of the world with cheap exports. Sometimes with Chinese firms making the thin margin on the products.

One difference this time MIGHT be that a US firm is not going in to sell to the China market but largely to enable Chinese Manufacturers to sell to the Chinese market rather than European companies. All for only a 2.5% royalty and the purchase of some chip sets which with the MSM6050 are already designed to be about the lowest cost chip out there that is possible. With Q's volume and design expertise on these chips it will be hard to come up with a lower cost alternative even at the low end. So the question is, do the Chinese get the profits on production of phones using
Q chips and CDMA technology, possibly exporting some phones to India and Latin America, and maybe even moving up the value chain to other markets, or do they squander this opportunity to have Europeans make the phones, or make phones for TDSCDMA which no one wants (even inside China)? I agree, even if they choose the right way, it remains to be seen if Q ever gets any free cash flow out of China but the choice of technology is obvious.
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