CDMA Tremours

Much has been blogged recently about withdrawal of Nokia from the CDMA market and its’ effect on Qualcomm. I would argue that the effect is actually a net positive for Qualcomm rather than a problem. After all, Nokia won’t be doing anything at all to grow the overall CDMA market and anyone who sells anything in CDMA has to pay Qualcomm Royalties. In addition, Nokia doesn’t buy chips from Qualcomm preferring TI. Further, there is the remote possibility that if Nokia was successful, then they would try and port part of its’ OS and UI to CDMA handsets, potential competing with Qualcomm in certain areas and thereby reducing Qualcomm take further. Most importantly, it’ll save the Qualcomm CEO quite a lot of earache from the whinging Finns.

However, the replacement by Telefonica of its’ Brasilian CDMA network with a GSM network or even worse the replacement of the Indian CDMA networks with GSM technology would be really, really painful.

Qualcomm faces two severe problems in the CDMA marketplace:

1. Its’ CDMA handsets are more expensive than the GSM equivalent. This is really, really important for operators as handset cost is one of the largest on-going expenses.
2. The spectral efficiency advantages that CDMA had over GSM is narrowing as CDMA technology is being deployed into GSM networks in the form of 3G.

Qualcomm’s response seems to be looking forward rather worrying about the past.

First of all, even if the CDMA market shrinks to zero over time, the replacement path which is basically W-CDMA means plenty more royalties payable to Qualcomm. The point worth fighting is to maintain the high level of royalties and this unfortunately probably going to the the courts.

Second, Qualcomm seems to be fighting real hard in the chip space and this is an area where it can definitely win market share away from TI and the rest.

Third, Qualcomm is showing an appetite for buying up the important patent real estate in the next generation of wireless technology (OFDM) witness the recent purchase of Flarion

Fourth, the rate of innovation and differentiation coming out of San Diego continues a plenty showing real daring with its’ multi-cast solution. One day I’ll get around to comparing R&D expense between the big manufacturers…

Personally, I think we are starting to see the start of the decline of CDMA technology, as we did with analogue and will eventually with GSM. However, I think Qualcomm is positioning itself to compete long into the future in whatever wireless technologies are the latest flavour as opposed to the one trick vendor of the past. This should be the real frightening thought for the new CEO of Nokia