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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Stock Farmer who wrote (124988)	11/1/2002 9:36:35 AM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 152472

John, your points on why QCOM might not make a lot of money from China are well taken, but other factors might argue against your position. First, China's existing communications network is unable to meet demands without adopting wireless services NOW. They can use GSM or CDMA, both of which are available NOW. They can't wait for TD-SCDMA, because they need better services NOW. And don't forget the Olympics, which will place even greater demands on wireless services. Second, QCOM made royalty agreements with Chinese companies at rates considerably lower than the going rate, provided that the equipment was sold ONLY in China. (Anything exported would be subject to a rate slightly higher than the going rate paid by other, non-Chinese exporters.) Given that the cost of chips keeps dropping and the total cost of handsets is dropping, the amount of royalty paid by a low end handset for use in China is a relatively small amount, probably of the order of a dollar per handset. The Chinese have to weigh that minor cost against the HUGE INVESTMENT needed for specialized chips for TD-SCDMA, the cost of incompatibility with other systems in use elsewhere, and the higher performance capabilities continually being added to QUALCOMM CDMA chips. Because of the low royalty rates for domestic sales of Chinese made CDMA handsets, the Chinese already have a very competitive position. I believe that even if TD-SCDMA is a viable system, and even if eventually it will be free of any royalty payments to QCOM (because of basic patent expirations), the Chinese can't wait that long to implement a monopoly. The need wireless phones now, and paying CDMA royalties to QCOM is their lowest cost alternative. Art