There are a number of things which will springboard Qualcomm forward in the coming year or so, perhaps the strongest thing in its favor is the fact that the cellular market is about to go into a period of network upgrades, as LTE emerges. Making chips that can all levels of network from GSM and CDMA to 3G and LTE will play to Qualcomm’s strengths.
The other two upsides for Qualcomm are its new relationship with Nokia, which has opened up 40% of the cellular market previously denied to it, as well as the changing nature of base stations as femtocell chips begin to make an economic impact. So for its next step Qualcomm is about to take on China.
Having signed up all three of the big handset makers for new licensing deals that cover 4G OFDMA technology, Qualcomm is feeling confident about its position in LTE, and plans to start selling 3G and 4G chipsets for the Chinese market from next year.
Although details of the chip giant’s renewed and extended patent cross-licensing deals with Samsung and LG, finalized recently, have not been publicized, they are significant for the lack of public legal dispute surrounding them (in contrast to Nokia’s) and the fact they include OFDMA patents under the umbrella agreement. After much uncertainty and argument over Qualcomm’s IPR position in the Chinese 3G technology, TD-SCDMA, that also seems to have been resolved, and the company is now moving ahead into handset silicon for China Mobile’s platforms, TD-SCDMA and TD-LTE.
Speaking last week, CEO Paul Jacobs said he expected to be selling chips based on the 3G standard within a year and to take a “significant share” of this new market. China Mobile deployed its first 3G networks this year and has been working hard to attract a wide range of devices for its single-carrier ecosystem. The primary device chipmaker has been MediaTek of Taiwan, which will not welcome the entry of Qualcomm, and Marvell also has TD-SCDMA chips in the market. Many of the non-Chinese handset makers that hope to carve out a strong position in TD-SCDMA are already Qualcomm customers, including the two Korean majors, and China’s own ZTE is also a major Qualcomm ally. There could also be the opportunity to expand the new friendship with Nokia, which leads the Chinese market and has been working closely with China Mobile on handsets for launch in 2010.
China currently accounts for 23% of Qualcomm’s revenue, its second biggest market after Korea, and the company plans to expand its R&D and client services operations in the country to ride on 3G expansion from next year.
Meanwhile, the CDMA giant also has its sights on China Mobile’s TDD implementation of LTE – the carrier, frustrated by the constraints of its 3G technology, aims to move as quickly as possible to 4G. Jacobs said Qualcomm will launch a multimode TD-SCDMA/TD-LTE chip next year too, as well as looking for opportunities for overseas acquisitions.
He told reporters in Hong Kong this week: “We see the biggest opportunity in China because its 3G user base is still small. Analysts expect China’s 3G users to grow to 211 million by 2013 from 30 million.”