O.K. O.K. now that Tim and I are, like you know, straight: you boys check this article out. Warning: it is not fun reading and it seems to me to be very balanced. Doesn't seem like GSM is dead to me:
Subject: LSI Logic is a good buy
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To: Daniel W. Barineau (10632 )
From: shane forbes Friday, Mar 6 1998 10:58PM EST
Reply # of 10681
Dan:
CDMA vs. GSM article with apologies to TSO & JMD!!!
(Actually article says both will coexist. But GSM's installed base is big and is still growing robustly and that's what's important for LSI's GSM chip to succeed. Take that 50 million handsets will be sold number and multiply by $15 or the price of LSI's chip - 750 million - 10% or 75 million will be very nice for LSI. Remember LSI just started a new division to address wireless communications (I think that's what it was called). They are making a push with what appears to be one kick-a** chip!)
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3 reasons there why I like LSI's GSM chip prospects:
(a) 74 million installed base
(b) "exponential" growth (my favorite word for product cycles)
(c) 50 million GSM handsets this year with what looks like a high CAGR over the next 5-7 years
(d) China?
Whether CDMA or GSM will eventually "win" is for you experts to debate!
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sumnet.com
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CDMA Vs. GSM
GSM, the European standard, is making inroads in the U.S.
By Carolyn Whelan
Atlanta, Ga.--CDMA (Code Division Multiple Access), Qualcomm's brainchild, was forecast to
be the big winner in the U.S. wireless market, beating out European incumbent GSM to become
the dominant wireless technology in the U.S. The technology, which only five years ago was
questioned as a widely-accepted standard--is considered superior by many due to its larger
capacity, sound quality and data throughput.
But the pendulum seems to be swinging back GSM's way. Pressing time-to-market issues are
pushing smaller carriers to embrace the more established technology. In addition, practical matters
like infrastructure costs, capital expenditures and roaming capabilities means that chipmakers and
electronics vendors can't ignore GSM (Global Standard for Mobile Communications).
Though starting late, CDMA has picked up only 1.5 million subscribers in the U.S. and 5 million
more abroad, compared to 74 million users of GSM worldwide. There are about 1.2 million GSM
subscribers in the US, says IDC. Worldwide, the GSM Association expects 55 percent
penetration over the next 5-7 years.
"The growing popularity of GSM handsets around the world is forcing manufacturers to look for
solutions they can use to bring phones to market faster," said Russ Johnsen, VP of Analog
Devices' (ADI) Communications Division. "Analog Devices is responding to that need with an
enhanced chipset-software solution for GSM phones." Last week, ADI unveiled two new chipsets
for integrating voice and data over GSM handsets.
In tandem OEMs are overcoming compatibility issues that have long frustrated overseas travelers
by producing dual mode GSM phones.
Nortel is one of a few OEMs supplying infrastructure for the GSM, CDMA and TDMA (Time
Division Multiple Access) markets. Pascal Debon, VP of Nortel's GSM wireless business, thinks
that ultimately the three will coexist, interoperate, and evolve together.
Mr. Debon thinks CDMA and GSM has an advantage because of its lower prices and worldwide
roaming capabilities. He blames the U.S. shift towards CDMA on marketing and IPR strategies.
GSM carriers including Omnipoint and Western Wireless are also bullish on the technology.
Western Wireless, which wanted to be first to market, chose GSM for its dependable technology,
rich feature set, and low construction cost.
Alan Haase, VP of Ericsson's Professional Services argues, "CDMA doesn't offer anything that
GSM doesn't already have." Mr. Haase sees a strong market for GSM. The big challenge for
GSM, he said, will be adding more features like prepaying and data while maintaining its current
speed and quality. "At the last count, GSM and CDMA were equal," he said. "The U.S. foot race
is going to be fairly close."
The CDMA Advantage
To others, like research analyst Pete Peterson at the investment bank Volpe, Brown, Whelan and
Company, the choice is less obvious. "Though GSM may be equal or better than CDMA in the
network protocol area, CDMA is superior for its air interface," Mr. Peterson said. "Overall, GSM
is more complete, more tight, and more specified, but from a spectral efficiency point of view
CDMA is a very attractive way to go."
Given the exponential growth that the wireless business is seeing both in the U.S. and worldwide,
many forecast the three to cohabitate. "When the dust settles it should be pretty transparent," said
Jorge Fuenzalida, a Manager in Deloitte & Touche's telecoms practice. "GSM has challenges, but
it doesn't have a death march at all. Worldwide, all three standards are going to coexist. And it will
be relatively transparent to the consumer."
One of the biggest trends in the U.S. Cellular market is more dual band phones. "The fact that the
U.S. has so many different standards is a big issue," said Emily Johnson, an analyst at In-Stat.
"And consumers want to communicate with everyone."
Still, the multimode, multiband market is a limited one, since 85 percent of users don't want
roaming capabilities, according to Paul Chellgren, VP of U.S. Sales for Nokia Mobile Phones. A
dual phone maker must sell 500,000 phones to be economically viable, he said. In that sense,
GSM has an edge. 50 million GSM phones will be sold this year, according to Mr. Chellgren.
Though Ms. Johnson confirmed that more carriers had opted for GSM in the 1900MHz PCS
(Personal Communications System) mode, she, too, considers CDMA to be a superior
technology because it uses the bandwidth more efficiently and gives a clearer signal. "There's fewer
technical issues with CDMA than GSM." she said. "But GSM is clearly the market leader,
especially outside the U.S."
In the PCS space CDMA's lead is not as dramatic as anticipated. "Of new units sold in the U.S. in
1997, only looking at PCS frequencies, CDMA 1900MHz phones had a slight advantage over
GSM," said Ms. Johnson.
Roots Of The Battle
The roots of the battle between GSM and CDMA run deep, and, many believe, are driven by
national politics and corporate marketing rather than true technology issues. In FY97, Qualcomm,
which patented the technology and aggressively markets its benefits received more than $150
million in royalties, or 7 percent of its total revenues.
GSM, a 900MHz digital-based technology emerged in 1992 as the cellular standard for Europe,
largely due to its roaming capabilities, with companies that now dominate the GSM market, like
Ericsson and Nokia helping to hammer out the standard. In tandem, AMPs (Advanced Mobile
Phone System), an 80MHz analog-based technology became the standard for cellular in the U.S.
Today about 80 percent of all low-feature phones in the U.S. remain AMPs-based.
Around that time, improvements in application-specific integrated circuits (ASICs), digital signal
processors (DSPs) and radio frequencies, among other components, enabled a more powerful
and lower cost handheld.
In 1992, to ramp up to the demands of data and video over the network, two engineers from
startup Qualcomm developed and patented an AMPs-based digital network, CDMA, which it
said increased analog phone capacities by 10 or more. CDMA uses codes to increase the amount
of calls that can be accessed in a digital system.
At the same time, another AMPs-based technology, TDMA was also evolving. TDMA enables
multiple conversations over the same line by cutting the line into multiple time slots.
Within a year, the three digital-based technologies emerged in the U.S. under the PCS (Personal
Communications Systems) umbrella, a newly-licensed spectrum in the 1900Mhz frequency range.
And as new licenses were auctioned off from 1993 onwards, service providers lined up behind
their favored technology, increasing competition within each class of brands. Though much was
heard about CDMA, particularly since some large carriers opted for the technology, GSM was
certainly not overlooked.
Among major carriers, no. 1 carrier AT&T and SBC chose TDMA. US WEST, Bell Atlantic,
Nynex, GTE, and, most recently, Sprint, went for CDMA. Bell South uses both TDMA and
GSM, while Western Wireless, Omnipoint, PowerTell and Pac Bell opted for GSM.
"Some small companies bid for GSM licenses due to faster-time-to market issues," said Mr.
Fuenzalida. "The technology is easily implemented because the infrastructure is already in place,
and many OEM engineers have already done GSM work in Europe." he said. "OEMs will hedge
their bets on GSM equipment, and then devote resources to other technologies."
Since GSM giants Nokia and Ericsson squeezed others out of the U.S. market Motorola, Lucent
and Nortel cast their votes for CDMA.
Today, to meet the varied demands of service providers in the U.S., many OEMs are producing
to two or three standards. Nortel and Lucent now sit on both sides of the fence, while more minor
European GSM players, including Siemens and Philips are tackling the CDMA market to "spread
out the risk".
Multimode Is Answer
Ultimately, the trend is towards multi mode handsets that allow users to interoperate between
GSM and Digital AMPs (CDMA and TDMA) technologies. All three technologies currently have
dual mode products.
Others are looking still further ahead towards mobile satellite services. GSM supporters are
banking on third generation technology, the Universal Mobile Telecommunications Technology
(UMTS) for global coverage of speech and low to medium bit-rate services.
Nevertheless, both worldwide and in the U.S., some clear interoperability issues have yet to be
resolved. Many U.S. businessmen doing business in Europe can't get calls. And two or more
wireless carriers in most American cities complicates things even further.
The end result? Atlanta currently has no live CDMA. Austin, Texas doesn't have GSM. Some say
operators are unwilling to cooperate on dual mode issues. Also at stake are site acquisition and
local zoning issues, which have held up PCS implementation. Many glitches have been solved
through co-location. But forging those relationships costs operators money and time to market.
Looking ahead, the 30 percent CAGR expected from emerging markets makes them even more
attractive than the U.S. to chip makers and OEMs. The infrastructure sector of this expanding
market was valued at $35 million as of October 1997, and should more than double by 2001,
according to Volpe, Brown Whelan and Co. The end-user handset equipment sector, valued then
at $20 billion, should expand at an even faster rate. Eventually, Asia will become the largest region
in the world purchasing wireless telephony infrastructure.
Latin America could go either CDMA or GSM, which until now has been the preeminent
incumbent cellular technology, though market penetration is less than 3 percent.
Many believed that Asia would opt for CDMA, since Korea and Hong Kong had chosen that
route. But given economic problems in the region, many countries may opt for the more economic,
faster-to-market GSM path. China already has several systems, including GSM. Right now Japan
has its own PCD standard. In the year 2000, around 40 percent of the world's wireless end-users
will be in the Asia/Pacific region, according to Mr. Peterson.
Digital Processing Drives Market
"The need for more spectrum capacity will mean service providers will apply digital processing to
antennas, air interfaces and human speech," said Mr. Peterson. "Digital processing will drive the
markets for digital components--digital signal processors, antennas, radios, linear amplifiers and
application specific circuits. These new digital systems and strategies will replace existing analog
systems, which, in turn will expand opportunities for digital equipment companies." he added.
Though the U.S. market has a long way to go before saturation, the bonanza ultimately lies in the
more populated, less penetrated regions of Latin America and Asia, where in some areas cellular
systems are leapfroging analog systems because the latter are either non-existent, outdated or
poorly serviced. All eyes are on China, India, Brazil and Russia to see which way they go.
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This would be a great time for y'all to jump in and slay this heretic although I must say this is one of the first GSM articles that gives me real pause. :( Surfer Mike |
