There were shock waves around the Mobile World Congress in Barcelona last week as Nokia and Qualcomm came out with an ambitious chip-handset alliance which threatened the bedrock of the cellular eco-system. Not only have the two buried the hatchet, but instead of finally beginning to work together on some unimportant product on the periphery of the industry, they agreed to annex the next generation of handsets in one fell swoop.
The device that comes out of this partnership will be a ‘swing’ device ‘ one that offers both old 3G HSPA and the new LTE, on a single chip, running Symbian. The announcement hit the cellular industry on so many levels.
It would open the door to the US market for Nokia, as the first handset from this proposed venture is destined for the US, and AT&T specifically requires such a device, so that’s probably its destination.
It will slam the door on ST Micro, Texas Instruments and Infineon, all of which might have hoped to offer that capability to Nokia ‘ we are not saying that Nokia won’t also second source this development, but given the recent wins in terms of speed to market that Qualcomm has had, they will have to be quick to get any crumbs from the table. Broadcom of course was pushed up the food chain in a similar announcement, moving from only supplying EDGE chips to one just short of the top table with vanilla HSDPA.
It looks like Nokia has embarked upon a strategy where Qualcomm clears out the dangers in new technology ground ahead, while Broadcom brings up the rear, in commoditizing the chips once they have matured.
Perhaps Nokia will offer the same kind of two tier play in Europe to the newly established ST Micro, now holding the mobile assets of NXP as well as Ericsson Mobile Platform, perhaps with Infineon taking on the Broadcom role. But it seems unlikely that things will be that clear cut. Nokia usually releases all of its new semiconductor relationships at once, and it has said nothing about the European companies.
If Nokia did want this kind of balance, then a similar set of supply relationships might also be made in the Far East, but it seems unlikely to us ‘ instead this looks more and more like Qualcomm taking on a role, whereby if it is successful, it will inherit the most profitable part of future Nokia chip supply, the first rounds of LTE devices.
This first deal with Qualcomm will enable Nokia to create a new class of phones, devices which can offer both HSPA and LTE on the same chip, a perfect bridge for upgrading to LTE, and likely to be destined for AT&T’s US network. A similar step with CDMA and LTE might later open the Verizon Wireless market up to Nokia.
We have to ask what will happen to the special relationship that Qualcomm has enjoyed with Samsung and LG ‘ the Korean powerhouses ‘ over the years? Will they perhaps wilt under the Nokia attention?
Nokia chip contracts have been in a state of transition for the past few years, with the dominance of Texas Instruments in Nokia devices in 2007 replaced by a four company allocation of chip designs with TI, ST Micro, Infineon and Broadcom each getting a piece of the action. Nokia has a habit of saying who it is working with on chips but never specifically alluding to chip orders and numbers of components.
In August 2007 preferred partners were announced as Texas Instruments across all platforms plus Broadcom for EDGE, STMicro for UMTS and Infineon for GSM.
TI has said in the recent past that it would like to fall out of mobile baseband chips and its remaining chip application processor architecture OMAP is now being threatened by chips which merge all aspects of a mobile phone into a single chip, an approach favored by Qualcomm.
The fact that Broadcom has now been added to the UMTS pile hurts the newly formed ST Micro, or at least offers a second source as a counter balance against its European dominance, and the appearance of co-operation with Qualcomm (primarily for the US market to begin with) is a knife to the heart of Texas Instruments and an about turn across the entire mobile landscape.
Both of these moves have been on the cards, partly because Broadcom was owed favors for helping show Nokia that Qualcomm did not always win intellectual property disputes, which in turn opened up the way for Nokia to challenge Qualcomm intellectual property in court and massively reduce its royalty payments to Qualcomm. After this win over Qualcomm, Nokia is now able to use Qualcomm chips and this opens up what is 40% of the world’s handsets which have been denied to Qualcomm until now. It is clear that this is unlikely to affect the current generation of devices, and the move to use Qualcomm chips in the US is a great move by Nokia, because Qualcomm now has to work hard to get Nokia some business in the US, a place where it has a tiny market share, in single figures. It is likely to give Nokia handsets some form of early market lead at AT&T when it transitions to LTE, and the handsets should be ready by mid 2010.
These advanced mobile devices will be based on S60 software and Qualcomm’s integrated chipsets for what it calls a new level of mobile performance. These will use a chip which Qualcomm only announced yesterday one in the line that it calls Mobile Station Modems, which now supports Android, Symbian S60, Windows Mobile and Qualcomm’s own Brew Mobile Platform.
Qualcomm introduced one new Mobile Station Modem, the MSM7227 at the show which is for sub-$150 smartphones for delivery this year while the MSM8xxx-series chipsets will comes later for top end phones and it seems that this is the class that Nokia will use.
The existing new MSM7227 chip supports rich multimedia HSUPA broadband, uses a 600 MHz applications processor with a floating point unit, 320 MHz application DSP, 400 MHz modem processor, hardware-accelerated 3D graphics, Bluetooth 2.1, GPS, 8 megapixel camera and 30 fps WVGA video encode, decode and display support.
“Nokia is very pleased to be in discussions with Qualcomm around designing mobile devices that can benefit from the high level of integration found on MSM chipsets,” said Kai Oistamo, executive vice president, Devices, Nokia. “We are eager to demonstrate to the industry the possibilities that exist when innovative and open software is combined with advanced hardware solutions.”
Nokia’s Kai Oistamo, Executive Vice President, Devices, Nokia said of the Broadcom deal, ‘This agreement, which targets low cost, high volume markets, demonstrates that we view Broadcom as a reliable supplier to bring the benefits of 3G to Nokia customers around the world.’
The sudden arrival by Nokia in 2010 at the back door of Motorola, just as Motorola’s own new Android based devices come to market, may also prove to be the last straw for the US handset vendor, if it lasts that long. Right now Samsung is relying on sweeping into the US market and soaking up any leftovers from the Motorola table and is doing very well there. If Nokia arrives with key new capabilities there in 15 months and takes its traditional market share, then it could slowly head from its almost 40% global market share now, towards something closer to 50% once LTE is the established technology in the US.
Now all of this is about cellular technology, not the traditional domain of Faultline, but LTE has been steadily accelerating ‘ initially caused in the last 3 years by the example of Wi-Fi and the threat of WiMAX, and more lately accelerated by the clear evidence that flat rate broadband pricing is driving ARPU and cellular uptake, which suggests that LTE, once it has arrived, will be so much easier to introduce than 3G, because its capacity will be required early.
LTE will provide broadband speeds which compete on a per user basis with where fixed lines were two or three years ago, and for many people that will be enough and there is the prospect of cellular operators in the 2011 to 2012 time frame, chasing the 500 to 600 million global broadband households, which serve perhaps 1.5 to 2 billion individuals with broadband, with a cellular fixed replacement.
In order to do that the cellular networks will have to make great savings on RAN networks, by sharing them, which will allow them the luxury of significantly upgrading backhaul services so that the modern cellular network of two or three years time takes internet video in its stride and not just QVGA video, but SD and then some.
Video of course, and specifically networks now carrying video which previously could not, IS the central subject matter of Faultline, and this new Nokia Qualcomm accord reminds us of how important, during this recession, it is for them to push LTE, and how rapidly LTE has come of age, and how it will become very quickly a simple act to bypass broadcast video and cellco unicast offerings, and to simply view internet video over a cellular network and to trigger video experiences up to and beyond standard definition, once LTE has taken hold.
And given the number of LTE trials and promises that we heard at the MWC this week, that day is now a lot closer.