The CDMA market is about to get a healthy dose of competition as a trio of companies -- Texas Instruments, STMicroelectronics...
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and Nokia -- take on market leader and pioneer Qualcomm. The three have teamed up to develop code-division multiple access (CDMA) technology to be offered in silicon by both STMicro and TI.
The new silicon will be targeted at the CDMA2000 1X and 1xEV-DV standards. Nokia has said it is already building phones with some of the technology and that it will build phones using the new chipsets when they are available. The two chip companies said samples will ship this quarter. TI has a patent cross--licensing agreement with Qualcomm, bypassing one of the traditional sticking points for companies trying to enter this market: high patent licensing costs.
Context: The CDMA market started when Qualcomm developed and then commercialized the technology. It has always trailed the rival GSM and GSM/GPRS markets in terms of overall market share. The rival platforms are prevalent in Europe and in parts of Asia, while CDMA is used in the Americas and has been expanding in China and South Korea. The technology has continued to advance, with efforts from Qualcomm and others contributing to its growth. The International Telecommunication Union (ITU) has tabbed CDMA as the platform for 3G, which has helped it grow – especially in Asia, where 3G is a reality, as opposed to the rest of the world where it is still just a good idea.
The market has its share of others seeking to cash in on CDMA's growth. VLSI Technology made silicon for this market, but the line was killed when Philips purchased the company. LSI Logic also made components for a while, but then sold that business to Via Technology. Intel purchased DSP Communications and killed its CDMA line. There is still some silicon being made by the odd vendor, but by all accounts Qualcomm makes up 90% of the total CDMA market.
Technology: CDMA sends multiple signals over a shared portion of spectrum. It assigns a different code to each transmission, allowing the network to separate the different calls. This lets more people share the airwaves at one time. In addition, it is generally cheaper to operate a CDMA network because it requires fewer cell sites than rival technologies. For cellular transmission, it operates in the 800MHz to 1.9GHz band. The CDMA2000 line is based on the ITU 3G standard and includes both CDMA2000 1X and CDMA2000 1xEV technologies. They deliver increased network capacity to meet growing demand for wireless services and high-speed data services. The chipsets that are under development will include RF, analog baseband/power management, digital baseband and the necessary software and drivers. There will also be reference designs available from the companies.
Strategy: The move will help both TI and STMicro in a number of ways. They can leverage relationships with existing GSM clients that are seeking to expand into or are already in the CDMA market. Giving these clients a one-stop shop for more of the overall bill of materials should expand the chip companies' sales without appreciably expanding their sales efforts. There's all the ancillary technologies that can be sold alongside the chipsets, too, such as Bluetooth, RF, digital signal processing and memory. Finally, the move simply opens up a large new market. While CDMA is significantly smaller than GSM (by about a factor of three) it is also growing faster, offering the opportunity for strong sales growth.
For Nokia, already the largest handset manufacturer, the effort will provide it with alternative sources for its chipsets. That should translate into lower prices, making it more competitive than it already is.
Competition: Qualcomm is the inventor and evangelist of this technology, and has been selling it for close to 10 years. With key patents, a dominant market share and relationships with all the existing players, the company is a force to be reckoned with. There is no significant difference between what it offers and what its rivals intend to offer.
The451 assessment: Qualcomm has been in the catbird seat since the inception of the CDMA market and has faced a number of challengers in the past. All have faded, as the difficulty of the technology coupled with high licensing costs prevented them from gaining any significant foothold. This, however, could be an entirely new ballgame. The new rivals are on a different footing than in previous attempts. It could also open up the overall CDMA market to even faster growth by providing price competition on the silicon.