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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Mike Buckley who wrote (28806)	7/25/2000 7:19:57 PM
From: sditto	Read Replies (4) \| Respond to of 54805

<<The ASIC category is in the lower, right corner, meaning ASIC have proprietary architecture but low switching costs. Due to the latter, ASICs producers don't typically play a gorilla game.>> It's a misnomer to refer to Spinco simply as an ASIC manufacturer. If you take a look at the MSM chipset diagram Eric L. provided me last week from qualcomm.com. you will indeed see a CDMA ASIC. However, the ASIC is surrounded by other chips glued together by software to create an open proprietary architecture for a 3G cell phone. Although some handset manufacturers will undoubtedly want to buy just CDMA ASICs (subjecting Spinco to an ASIC-to-ASIC substitution threat at some later date) Spinco must focus on selling the entire MSM chipset (which will have much higher switching costs due to its additional functionality and integration points) to other manufacturers. One of the more exciting things I heard on the conference call was the QCOM emphasis on providing investment and intellectual capital for creating a "virtuous cycle" of value added applications and services to ride the Spinco platform - in the process creating BTEs for competitors and SCs for customers. If played right, this becomes the wireless equivalent of the MSFT/INTC dynamic duo we've hoped for. The bad news is QCOM is behind in that game. The good news is the move to CDMA 2000 could give them an early proving ground where their expertise combined with the availability of high speed data links could provide some enduring first mover advantages.

To: Mike Buckley who wrote (28806)	7/26/2000 10:39:17 AM
From: rushnomore	Read Replies (1) \| Respond to of 54805

re QCOM, Spinco If CDMA-based ASICs really are no different in that they are as readily substitutable as all other ASICs, then it's equally important that we recognize that the ASICs portion of Spincom's business model is a royalty game, not a gorilla game. Mike, Jerry: I have had a lot of experience in electronic circuit design, but not much with ASICs specifically. Many times I have found that it was difficult if not impossible to find a "ready substitute" integrated circuit (IC) for an IC in an existing design, for example when the original IC was discontinued by the manufacturer or was in short supply. The costs involved in switching to a substitute IC which was not exactly like the original were substantial. As another example, the Macintosh computers use ASICs which are essential to the personality and the hardware and software compatibility of the system. No other manufacturer can readily build a Mac-like computer without essentially duplicating those ASICs. Apple controls the ASIC designs. However, I don't think that TRFM (p. 55) is talking about that kind of substitution. Moore says about ASICs "They are changed typically with each new generation of the product." Similarly with disk drives and web browsers. Applying this observation to the cell phone business, It appears to me that if Spinco cross-licenses with other chip manufacturers then cell phone manufacturers could make successful cell phone designs with CDMA ASICs from any of several chip manufacturers. The various cell phones would have different features, and some might work better than the others. My opinion is that Spinco will be in a royalty game with respect to CDMA chips.