Now the situation is different in that mobile wireless data is a potential tornado that has not happened, so Qualcomm is not yet a gorilla in that area, and Eric L has raised questions about WCDMA aka UMTS where the Q has essential IPR and will be paid the same royalties as with other CDMA. The question is the degree of control.
I agree with Eric as of right now.
A significant IPR portfolio that cannot be avoided seems sufficiently analogous to architectural control to render it a functional equivalent. Ask Nokia. Without a license, its plans to become dominant in 3G infra were dreams.
If every user of the architecture is required to go through an IPR toll-gate, then there is control over the architecture, though it may not be absolute control over every detail. It seems that if a company has enough control to act as an arbiter of who can use the architecture, then it has established control over it.
True, if Qualcomm uses it's IP to take market share, then I see gorilla type power (on par with MSFT's power, although technically Qualcomm doesn't control the WCDMA architecture, so technically it may not be a gorilla). Here's the thing, I don't think Qualcomm can use bulling tactics (like not licensing IP to nokia to screw them over or other ASIC companies, ect..) or else the industry will find another technology to standardize around or stick with the current one (GSM).
I think the reason it's important for Qualcomm to control the architecture is because every time they introduce a new version of their CDMA2000 standard they can include more/new patents that have been granted. That way they could extend their hold on CDMA past 2016? Another reason would be that Qualcomm has 1st mover advantage when it comes to making ASICs for their architecture. This is important because these are competitive advantages no other company can duplicate. You want to own companies that can do something unique no one else can do. If you're doing the same thing as everyone else, your going to fail.
Some would argue, though, that the industry has no choice but to license CDMA, because CDMA is so efficient when it comes to data and eventually data will become important.
Take China for example. Qualcomm receives a low royalty on domestic handset sales (2.65%) yet China agreed to exclusively use Qualcomm ASICs (exports of handsets is like 7% royalty rate). The whole purpose of owning a gorilla, in my opinion, is that gorillas are able to extend into new markets. Keep prices high which means margins stay high. Competition isn't much of a threat. The only threat to a gorilla is a DI and that doesn't happen all too often.
Of course, I am not certain that it was Qualcomm's IP that allowed them to get that exclusive deal or did China use it's huge population to get Qualcomm to play on their terms? It may have been a compromise and both sides viewed the deal as a win. Most QCOM investors, however, are probably disappointed with the low royalty rate.
Another advantage I think Qualcomm may get in the ASIC business because of it's IP is that they have all the GSM IP they need for free. So one would think that they automatically have an advantage when it comes to producing ASICs, since everybody else has to pay for GSM and CDMA IP?
Then there's BREW. It remains to be seen, but I think BREW could allow Qualcomm to differentiate it's ASICs even more from their competitors, although as of right now I remain skeptical of BREW's chances outside of CDMA2000.
Here's a good article on BREW:
mbizcentral.com
BREW solves a problem that's hobbled the wireless industry as it lurches toward data services: Nearly every cell phone sold today is born to be thrown away. Handset manufacturers must load each phone's applications onto the handset at the factory. Further, each application must be custom-built for each individual handset. Want a new set of applications? Toss your old phone and buy a new one -- and that's an expensive problem not just for the consumer. Without a way to install new applications on existing phones, carriers face a difficult, time-consuming, and expensive proposition when rolling out new services to users. Not to mention that ambitious young entrepreneurs (or anyone else) looking to deliver data services over phones are limited to that phone's built-in apps, which in the U.S. might include a Wireless Application Protocol (WAP) browser and a simple text-messaging program, if you're lucky.
At the most basic level, BREW makes it easier for programmers to write applications for CDMA phones, from a simple alarm clock utility to a complex email application. The part of BREW that resides on a handset splits the difference between an operating system and simple driver software that might let a PC talk to a printer. BREW exposes the functions of the CDMA chipset (such as Bluetooth, Global Positioning System [GPS], screen display, and call-handling functions) in a neatly packaged series of application programming interfaces (APIs) -- pure gold for a programmer trying to write an application as quickly as possible. The handset portion of BREW also contains a tiny management application that lets users download new applications to their phones and delete old ones.
and..
After verification, the application goes onto a Qualcomm-hosted server, along with what James calls a "term sheet" listing what the application does and how much the developer wants to get paid for it. Participating carriers then check out applications, grab the ones they like, and contact the developers directly to negotiate terms. James says that Qualcomm plans to encourage developers to strike up independent relationships with carriers and market their applications directly to them, but, technically, a small developer could post a cool application and end up in negotiations with a very large company.
This is all speculation, but if handsets connect to a Qualcomm-hosted server to download applications (right now I think the carriers (the Sprints, Verizons, ect..) connect to this server and pick and choose which apps they want to provide to their users) then Qualcomm could do the same type of things Microsoft has (i.e. where MSFT apps work better on Windows than non-ms apps) BREW apps would run better on a Q ASIC?
here's a demo of BREW:
qualcomm.com
more brew articles..
qualcomm.com
E.g., Intel makes the CPU, sometimes the support chips, but doesn't dictate everything in the box. We may have our little disagreements about Intel, but they don't revolve around this issue.
Intel does dictate who gets a x86 license i believe. I also believe market share breeds market power. Since Intel has so much market share, they can bully companies around..much like Microsoft, but if AMD ever gets an entire product line (of servers, desktops, and laptops) and the OEMs are not afraid of pissing INTC off, then Intel's ability to dictate other parts of the PC industry would probably decrease. Eventually, Intel plans to move their new IA-64 architecture into the consumer space (around 2006/07) and this could give Intel a true gorilla hold. But Intel doesn't dictate everything in the box. I think Intel's move into the chipset market is/was a way for Intel to dictate the rest of the box because everything in the box talks to the chipset. In the last few years I think Intel has lost it's dominating lead in the chipset market to VIA and others, but I could be wrong.
Neither has (full) architectural control of WCDMA either because they are both committed to open non-proprietary and commitee-based architecture and standards.
True, but I would think Nokia and Ericsson are more than happy to share IP. As long as those Asians don't come rolling in and kill their margins.
Nokia is a clear cut King in Moore's terms in handsets, and Ericsson could be (although more likely the dominant Prince) in infra, respectively the razors and razor blades of wireless.
While handsets make a large portion of Nokia's revenues and probably profits, only 20% of the billions they spend on R&D is on handsets. It would seem as though Nokia is really moving away from being a handset company, no?
<< If every user of the architecture is required to go through an IPR toll-gate, then there is control over the architecture, though it may not be absolute control over every detail. >>
Here's an analogy that may help (Eric correct me if you don't agree). Apple would be like Qualcomm if they had patents on the GUI and licensed those patents to Microsoft. Just because Apple received royalties from every sale of Windows, that doesn't mean Apple controls the Windows APIs..
Controlling GUI technology and the Windows architecture are two totally different things.
The network effect and value chain would still support Windows and Apple would still never be able to regain it's former glory IMO.
They'll become the 3G gorilla, in my mind, if and when cdma2000 is more widely adopted than UMTS and only when 3G shows clear signs of displaceing 2G, and all-IP packet data starts displacing voice.
If Qualcomm was able to achieve a commanding lead in the WCDMA ASIC market they may be able to get a gorilla type hold in the WCDMA market, although since WCDMA is an open committee based technology, Qualcomm will always have to obey the committee's wishes. I doubt the committee will like seeing Qualcomm extend a gorilla hold in WCDMA. So one would think that the committee would find ways to break Qualcomm's hold on WCDMA, although Qualcomm could pull a Microsoft. Embrace and extend. Qualcomm could embrace WCDMA and then extend proprietary stuff like BREW.
The value of architectural control is in keeping Monkeys from gaining market share. Intel has done this on several occasions (as with mmx) to keep AMD in check. But since qcom has patents on the cornerstone of wcdma - the air interface - I don't see their lack of control over rest of the system as a weakness. Their market share in wcdma is guaranteed by their patents and by the laws of physics.
I would have thought at first that MMX would give Intel a stronger gorilla hold as more applications are written with MMX extensions (i.e. meaning INTC processors run software better than AMD processors), but AMD can support MMX just as easily. Plus, MMX wasn't really popular in the gaming industry. While it did improve speed, it wasn't justifiable since the amount of time it took to write games to support mmx. Game developers figured they could spend their time doing other more important stuff than developing a game that supported MMX. That was 2 or 3 years ago. Today, I don't know if game developers support MMX, MMX2, and SSE or whatever.. |
