Snapdragon and Motorola 3G deal highlight the bright side for Qualcomm
Published: Monday 20 November, 2006
On a financial analyst tour in the UK last week, Qualcomm CEO Paul Jacobs lamented that, on a day when the chipmaker made a string of major announcements, the commentators were only interested in asking about the licensing disputes with Nokia. Important as that relationship is to Qualcomm's future performance, analysts would be well advised to listen rather more closely when the CDMA giant talks about new products. In the end, what will cushion Qualcomm even if antitrust and licensing arguments go against it will be its technological excellence, and its ability still to rely on turning out good chips that customers need to buy. As such, last week's launch of Snapdragon, which brings advanced connectivity to consumer devices, should be given as much weight as the latest Nokia spat - while the latter may highlight Qualcomm's key vulnerabilities, the former plays to all its main strengths, such as its leading ability to integrate and shrink technology and its shrewd understanding of where operators' business models are heading, and how silicon needs to support that.
Jacobs insisted last week that he saw Intel, not Texas Instruments, as the key challenge to Qualcomm, regarding the latter as too driven by the Nokia business to lead market trends or to be truly broad brush. However, Snapdragon reinforces the view - especially with Intel pulling away from its XScale smartphone architecture to concentrate on challenging the mobile chipmakers with WiMAX and Wi-Fi - that the new cellphone generation is a battle with only two real contenders, Qualcomm and TI. This is a generation of devices that needs to combine new extremes of compactness, low power and low cost - to support accelerating operator business cycles and cope with unprecedented price pressures on handsets - with integration of the full set of multimedia functions, including multiple radios, television and easy coexistence with other broadband platforms such as set-top boxes. The two majors have both dramatically honed their skills at these two extremes in the past two years, resulting in architectures like TI's eCosto and LoCosto - which combine its advanced multimedia application processor platform OMAP with VoIP and video functionality in an 'out of the box' reference platform, addressing the challenge of delivering high function multimedia at very low cost and so addressing the consumer demands of emerging markets like China.
For Qualcomm's part, it has moved rapidly to push HSxPA, CDMA EV-DO, Wi-Fi, mobile television and various VoIP and video functions into single-chip architectures, reference designs and highly integrated chipsets targeted at advanced consumers in emerging markets. It has taken key differentiators from CDMA, notably extreme integration and strong multimedia software like Brew, into the UMTS/HSxPA world and could also, political objections aside, exploit the same advantages in WiMAX, a step Jacobs hinted last summer would happen once Qualcomm saw sufficient market mass for 802.16 chipsets. Where it has generally been perceived to lag TI has been in the application of consistent architectures beyond the handset, so tapping into the fixed/mobile convergence market and the increasing connectivity between cellphones, PCs and set-tops. Snapdragon is an important move to build on the existing strengths and also to steal a march on TI - more naturally suited, given its set-top box business, to convergence - in this critical area of operator interest. “Qualcomm is driving a shift that is taking place in portable electronics by adding ubiquitous connectivity with zero compromise for the user experience to an extended range of devices,” said Sanjay Jha, president of Qualcomm CDMA Technologies.
The Snapdragon platform is based around a 1GHz customised ARM core designed by Qualcomm, called Scorpion, paired with a 128-bit SIMD (single instruction, multiple data) processor and a 600MHz digital signal processor to accelerate multimedia applications. On the RF chip, Snapdragon will incorporate options for EV-DO, W-CDMA, HSDPA and HSDUPA, broadcast television and multimedia, Wi-Fi and Bluetooth.
Significantly, Samsung will be the first customer. Together with an announcement of Motorola as a customer for its UMTS products, made on the same day, Qualcomm managed to demonstrate how, whatever the legal and commercial battles going on with the handset community, only Nokia has the political need and desire to try to bypass Qualcomm altogether. For the rest, their first priority is to acquire chipsets that will support the demands that operators are making of next generation handsets, notably converged multimedia at low cost and time to market, and they will buy that from any chipmaker that can deliver. Currently, that largely means Qualcomm and TI in the 3G and 3G/multimode sectors.
Snapdragon-based chipsets are scheduled to begin sampling in the third quarter of 2007 in gaming devices and PDAs as well as smartphones, as Qualcomm looks to use its integration skills to support the demand for single consumer devices that perform multiple functions. One likely candidate to be the first Snapdragon device on the mass market is Samsung's Q1 ultra-mobile PC. If this materializes, it will be a serious blow to Jacobs' bugbear of choice, Intel, which has an advanced roadmap for ultra-mobile PCs or handtops (see inset) that keeps its x86 architecture firmly in the driving seat, even as the shape and function of the PC changes out of all recognition into a truly mobile multimedia device.
"Whether handheld devices rely on an x86-based processor or another kind of processor matters less as we go forward,” said Qualcomm's Luis Pineda, head of product marketing and management. “What customers really want is the ability to run their existing applications. Whether it’s on x86 or RISC doesn’t matter so much.”
Another significant boost for Qualcomm comes with the announcement that the company will provide Motorola with UMTS chips and work with it on future 3G phones. This is the kind of endorsement that Qualcomm badly needs. Its intellectual property revenues from W-CDMA have flourished and allowed it to cross the bridge into the formerly closed community of GSM operators but it is well behind TI in terms of tier one customers, and for all the focus on its patents business, its lifeblood remains actual shipments of silicon. Motorola will use Qualcomm's single-chip solution to lower its costs and drive 3G into broader consumer markets and emerging economies and expands a relationship that has focused in the past almost entirely on CDMA. The extended deal is clearly a blow for Freescale, Motorola's former chip unit which has now been taken into private ownership by a consortium led by the Blackstone Group. A period after the spin-off when Freescale was still guaranteed certain Motorola contracts has now expired and it will not be comforting to the company's new owners that its former parent has defected so quickly on the UMTS front. It also reinforces the expectation that Freescale will defocus on cellphone processors and exploit its strengths more aggressively in embedded markets.
Once again, Qualcomm's advanced abilities in integration are key to the deal. "The single chips should help whittle down Nokia's cost leadership in 3G devices, making Motorola much more competitive in 3G as long as it can get the user experience right," commented Richard Windsor, global communications equipment analyst with Nomura International, in a research note last week.
Qualcomm's first single-chip UMTS implementations, shown off last week, are the QSC6240, dubbed Wedge, a device combining support for W-CDMA and GSM/GPRS/EDGE; and QSC6270, or Hedge, a device that also adds HSDPA support. Both chips integrate a baseband processor, multimedia processor and receiver on a monolithic 65-nanometer CMOS die. The chips integrate a USB 2.0 port and advanced codecs like eAAC+ and H.264. They can support camera resolutions to 3 Mpixels, and as many as 72 simultaneous polyphonic ringtones. Qualcomm claims Wedge and Hedge reduce bill of materials costs and discrete components, delivering board area savings of up to 50%.
Such advances are what the chipmaker needs to cushion it from the legal and licensing blows that are likely to haunt it in the coming few years, and that will allow Qualcomm to flourish even if its darkest scenarios come to pass - rapid decline in CDMA, dramatically reduced CDMA licensing charges, even a break-up of the company. All these are worst cases, and the reality should be a far more mixed picture, but the fact is, Qualcomm is building up its arsenal for a new and more unfriendly world, and showing skill at identifying and tapping into key carrier trends. For that reason, Snapdragon and its successors will have even more long term significance than the outcome of the ongoing Nokia debates.
Qualcomm becoming a law firm:
Qualcomm's chairman Irwin Jacobs said last week that he believes the firm is entering a new phase of heightened regulatory and antitrust scrutiny around the world. Speaking at a conference at George Mason University Law School, he said: “There are several companies that used to say CDMA would not work but suddenly switched over to call us a monopoly because of the fact that we have a lot of the intellectual property rights, so they made a complaint to the EU." In fact, he argues, the inclusion of W-CDMA in the market means Qualcomm is no longer the largest supplier of CDMA-based chips and so cannot be called a monopoly.
However, he acknowledged that probes in the EU and Asia have forced Qualcomm into a new operating mode. “I think the issues are switching to the kind of regulatory and antitrust issues” that Qualcomm did not have to deal in earlier years, he commented. "Now I think we’ve become very much of a law firm.”
Qualcomm said last week that it was "not optimistic" it would strike a new licensing deal with Nokia by the April deadline, which could see both companies lose rights to sell components they make under each other's patents. Qualcomm president Steven Altman also said he expected European Union regulators to continue an informal probe sparked by complaints from Nokia and others that Qualcomm's licensing fees are too high, but a decision on formal charges would take "many, many months or many, many years".
Talks to extend Nokia's license for CDMA and W-CDMA patents at the same rates agreed on in 1992 were not going well, Altman said. "The negotiating team is not optimistic that we are going to end up reaching an agreement by April 9 2007. What happens in that case, under the current agreement their rights to sell handsets - W-CDMA, CDMA2000, other forms of CDMA handsets under most of our patents including our essential patents - expires. Our rights to sell chips under their patents also expires," he explained to analysts in London.
Altman said Nokia had tried and failed to design its way around CDMA and had ended up signing up for a license in 2001 after a similar dispute. "I think that says a lot. It says that they understood the value of our patents versus theirs at the time and the contribution that we bring to the marketplace."
Intel's 'handtop' challenge to Qualcomm
Qualcomm's ambition to move, via Snapdragon, into devices traditionally dominated by Intel x86 will be a threat to one of Intel's more creative roadmaps, the 'handtop' platform outlined over a year ago. Intel knows, like Qualcomm, that its challenge is to prolong the life of its architecture by evolving it into new devices that will be relevant in the era of ubiquitous wireless communications, when the PC is no longer the primary client platform and the cellphone is not the only voice device. Eventually, there will be a single handheld device that combines wireless IP communications for voice, data and video; mass storage; and acts as a credit card, home automation controller, music and video player and telephone directory. The big question is whether the dominant converged devices spring from a cellphone or PC heritage and, while Intel and Microsoft are both making a play for the former market, their real opportunities lie in creating a PC-oriented IP platform that can incorporate telephony capabilities too.
One step on this road for Intel was detailed by Intel CEO Paul Otellini in fall of 2005. The handtop is superficially a PDA, but promises to deliver the full PC experience in a truly mobile device, with Wi-Fi and/or WiMAX connections, multi-gigabyte hard drive and optional cellular links. It would act as a hub for communications and multimedia activity and a personal data store, and would use the forthcoming Wireless USB short range wireless standard to link at high speed to peripherals such as PC screens, televisions and larger storage drives to improve the user experience.
This is how the PC concept will survive, and Intel has pursued the idea for years, though with less technical detail than it now provides, partly because only recently have we seen battery advances to make the vision viable. Nokia and others are ploughing a similar furrow with internet tablets and other wireless devices that may or may not feature cellular radios, but do offer a next generation PC experience for business or leisure.
The real gamble at the heart of Intel’s handtop roadmap is - if it can shrink Centrino and either desktop Windows or desktop Linux into a cellphone-sized package with an adaptive radio to allow connections to many wireless options and a large disk drive, and can make that device run on battery for five hours or more, what is left for the architectures of Texas Instruments/Nokia and Qualcomm, especially when the specialized cellular networks are giving way to all-IP systems? Snapdragon is part of the Qualcomm response to this question. Like Nokia's tablet, it will support products that will come out of the cellphone industry, but have very little to do with cellular networks, instead targeting mobile IP devices for a variety of markets from enterprise to media consumer.
....
rethinkresearch.biz
TM |
