Qualcomm´s Multi-lemma
1) Introduction to the highly systemic wireless industry
2) Challenges that Qualcomm faces
– Within the Cellular industry Qualcomm faces the challenge
of a new standard - WCDMA.
– Within the larger Wireless Industry Qualcomm faces the
challenge of another new standard – WI-FI (802.11)
3) Wireless data opportunities
December 8, 2003
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Cellular System Components Overview
Mobile Phone
Air Interface & Frequency
Antenna &
Base Station
T1, T3 lines
Backend Equipment –
Switching, Billing etc.
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Cellular Technologies
•
Analog – Uses the complete frequency for one call.
•
Time Division Multiple Access (TDMA) – Divides the frequency into
time slices, e.g. US-TDMA and GSM.
•
Analogous to many pairs of people speaking with pauses that are so
small that no one notices the delay.
•
Code Division Multiple Access (CDMA) – Call signals are transmitted
simultaneously, but using different orthogonal codes.
•
Analogous to many pairs of people speaking simultaneously in
mutually exclusive languages.
Advantages of CDMA
•
10-15 Times the Capacity Improvement
•
Lower power usages => longer battery life and less over heating
issues
•
Geared for Data
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Cellular Systemic Industry – 2G
Technology
Chips &
Software Stack
Phone
Equipment
Service
Providers
December 8, 2003
CDMA
GSM
(20% of World
Market)
(70% of World
Market)
QCOM – 5% royalties
Nokia, Ericsson,
Siemens, etc.
QCOM – 95%, MOT,
LSI, Samsung etc.
Nokia, Ericsson,
Siemens,etc.
Samsung, LG, Sanyo,
Sony-Eric, Motorola.
Nokia, Ericsson,
Motorola etc.
LU, NT, Eric etc.
Nokia, Ericsson,
Siemens, Alcatel etc.
Verizon, Sprint PCS,
South Korea etc.
Nextel, Cingular,
T-Mobile, Europe etc.
5
Mobile Market
GSM market
CDMA
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Cellular Systemic Industry – 2.5/3G
Technology
CDMA-2000
WCDMA
GSM
(1X- 256Kbits/s
2.4 Mbits/sec
(GPRS – 40Kbits/s
EVDO-2.4 Mbits/s)
2005
EDGE-70Kbits/s)
QCOM – 5% royalties
Nokia, Eric, Siemens,
QCOM- 5% royalties.
Nokia, Ericsson,
Siemens etc.
Chips &
Software Stack
QCOM – 95%, MOT,
LSI, Samsung etc.
TI, Nokia, QCOM, LSI,
Samsung etc.
Nokia, Eric,
Siemens etc.
Phone
Samsung, LG, Sanyo,
Sony-Eric, Motorola.
Samsung, LG, Nokia,
Sony-Eric, MOT etc.
Nokia, Ericsson,
Motorola etc.
LU, NT, Eric etc.
LU, NT, Eric, Nokia,
Siemens, Alcatel etc.
Nokia, Eric, Siemens,
Alcatel, Motorola.
Some parts of Europe
Cingular, T-Mobile,
ATT, Europe etc.
Equipment
Service
Providers
Verizon, Sprint PCS,
Nextel, South Korea
China, India, Japan,
South America etc.
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Qualcomm`s current business
QCOM CDMA
Technologies
Revenues (52% of total
$3B)
$1.5B
Operating Margin
(28%)
$500MM
QCOM Technology
Licensing
Revenues (34% of total
$3B)
$1B
Operating Margin
(89%)
$900 MM
* 2002 Annual Report
December 8, 2003
Market
share
TOTAL market
12.5%
$12B
-Qcom - 95% of
the market
-Scale (partnered
with IBM)
CDMA2000
√
?
-Nokia/Ericsson
have an
advantage
√
-5% royalties –
guaranteed
WCDMA
√
-There are more
patent holders.
How will they be
compensated?
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WCDMA Forecast
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Pros and Cons supporting WCDMA
Advantages

WCDMA will be the only technology accepted in Europe (license)

Upside - Royalty revenues from WCDMA up to $10 Billion

Early adoption of WCDMA implies early increases in royalty streams
Disadvantages

QCOM less likely to be a major player in the chip market – cannibalize existing
CDMA 2000 chip sales growth

Potential adopters of CDMA2000 will adopt a wait and see approach.

High uncertainty regarding demand (see previous slide)
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Qualcomm Strategy in WCDMA
Qualcomm is assisting in the early development and adoption of WCDMA

This will cost Qualcomm significant dollars in R&D, specifically in optimizing
WCDMA systems.

Partnering with a major chip manufacturer to achieve scale.
Hedging the bets

Qualcomm is also rigorously pushing CDMA2000, and also its solution of
GSM/1x to convert existing non-European GSM providers to CDMA2000
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Wireless Convergence
Cellular
Laptop
(3G)
WI-FI (802.11/.15)
Frequency
Exclusive
Shared;
Free
Coverage
Excellent Coverage;
Mobility
Growing Coverage;
No Mobility
Manufacturers
Cellular Manufacturers
D-Link, Cisco, Intel
etc.
Service Providers
Cellular Service Providers
Airports, McDonalds,
Individuals? Etc.
Services
Voice, 3G Data
Data,
Voice over IP
Costs
Service charge to end user
Free to end user,
Service provider pays ISP
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Wireless Data User Segment Analysis
Wireless Access
Corporate Access
Commercial Services
Communication
Speed
Wireless LAN √
Mobile Service Providers X
High
Medium
Low
Reach
Wireless LAN X
Mobile Service Providers √
Low
High
Medium
Mobility
Wireless LAN X
Mobile Service Providers √
Medium
High
Medium
Affordability
Wireless LAN ?
Mobile Service Providers ?
Low
Medium
High
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Qualcomm WI-FI Strategy
Qualcomm may incorporate WI-FI into its chips.
Reasons :
• WI-FI can never directly compete with 3G cellular because
– Low Coverage
– No Mobility
– Less security
• WI-FI can add the following benefits to Qualcomm’s chips
– Cheaper last mile solution for service provider
– Higher data rates without mobility
• Anything that grows the demand for data services is good.
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The Wireless Data Revolution
Wireless Data development phases:
1. Person to Person
2. Person to Machine
3. Machine to Machine
Cellular Data Strengths:
1. Mobile
2. DSL like Data rate
Cellular Data Weaknesses:
1. Input/Output Constraints
2. Lack of the “Killer Application”
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Conclusion



The wireless industry is a very systemic industry, composed of various other
systemic chains within chains.
However, it is in everyone’s interest to grow consumer demand for wireless,
specially wireless data, and this is what in the end drives the overall strategy of
all the wireless companies, cellular and non-cellular.
The upcoming wireless data boom shall create great opportunities for the
prepared entrepreneur.
December 8, 2003
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