J.P. Morgan on Qualcomm/Nokia
Hi JG,
Was that JP Morgan report authored by Ehud Gelblum (a reasaonably astute analyst who covers Nokia and at least relatively recently also Qualcomm)?
<< JPM believes "this is a strategic error by Nokia despite helping it break into the US as we believe it 'starves' other erstwhile chip providers of business, and thereby R&D dollars, helping QCOM, the 800-pound gorilla in the market, to further distance its products from the competition ... >>
I don't totally disagree with that portion of the JPM statement even though back in July I somewhat recklessly stated ...
"It crosses my mind, and I never thought I'd say this ... but if Nokia and Qualcomm really put there minds to it, and fully exploited the mutual opportunities real strategic partnering might offer, we could potentially have the closest thing we've ever seen since, to the formation of the Wintel duopoly in the early PC era that continues till today. This despite the obstacles and barriers the mobile wireless industry and regulatory agencies have since erected to prevent such a phenomenon."
From a practical perspective though, I do seriously doubt that this is really a strategic error by Nokia, or that it will lead "Nokia eventually back to a single-source situation similar to what Nokia was in with supplier TI for GSM" [...and 3GSM UMTS] until very recently]. All the major mobile device manufacturers need at least a dual source of primary IC silicon supply, and with Nokia producing almost half a billion handsets being produced a year, (and #2 Samsung at close to 200 million) those are probably the only two OEMs that can really justify or effectively manage more than two primary sources of baseband/apps processor (integrated or unintegrated) source of supply. I don't see Nokia ever returning to single source of supply for any segment of their product line. The Nokia/TI strategic partnership was a model for mutually beneficial strategic partnering (with ARM a 3rd party to that partnership) and sole sourcing of baseband and apps processor lasted longer than anyone (including TI) anticipated.
<< JPM doesn't explain why this is bad for Nokia; it just assumes that principal reliance on one company is not good. It could obviously be good for Qcom so long as Nokia doesn't demand too low prices. >>
At such time as Qualcomm (and if Qualcomm) becomes the dominant supplier of 3G/4G Nokia IC silicon, we can bet our bippy that Nokia will be pummeling the stuffing out of Qualcomm for prices that you and I would consider to be "too low" and with margins we'd also consider to be "too low." They do that to all their partners already. It's the name of the game, and one of several reasons for multi-sourcing for the big hitters like Nokia and Samsung (who itself and unlike Nokia designs and manufactures a competitive A-Processor that they seem to be evolving quite nicely, and which they could evolve into an integrated A-Processor/C-Processor with baseband and RF IP from others like Icera or TTPcom/Motorola who they easily could afford to buy lock, stock, and barrel if they were so inclined).
JMHO and FWIW
Best,
- Eric - |
