Nokia deal to boost Qualcomm in mobile handset baseband chips, says iSuppli

Due to its recent agreement with Nokia, Qualcomm is likely to solidify its lead in the global market for mobile-handset baseband semiconductors, according to iSuppli.

Qualcomm in the fourth quarter accounted for 40.6% of worldwide revenues from shipments of mobile handset baseband semiconductors, up from 36.3% in the third quarter. Qualcomm expanded its lead over the number-two supplier, Texas Instruments (TI), to 20.9 percentage points, up from 14.1 points in the third quarter.

Nokia and Qualcomm this month announced they will collaborate on the development of advanced UMTS mobile devices, initially for the North American market. For this effort, the companies will utilize Qualcomm's 3G mobile station modem (MSM) MSM7 series and MSM8 series chipsets that provide processing and mobile broadband capabilities.

"Until now, Nokia and Qualcomm have had frosty relations as they battled over IP rights and royalty payments related to 3G technology," said Francis Sideco, senior analyst of wireless communications for iSuppli. "Furthermore, Nokia has used custom 3G silicon from ASIC powerhouses, STMicroelectronics and TI. However, with 3G technology maturing, there is less differentiation to be had from custom ASIC solutions, making Qualcomm's standard silicon more attractive as it allows Nokia to focus on enhancing handset designs and service offerings to improve the consumer experience. This can only be considered a positive development for Qualcomm's position in mobile handset baseband semiconductors and another challenge to overcome for its competitors."

Nokia now can adopt a complete Qualcomm solution for its 3G phones, including the modem, baseband and RF segments, simplifying the design of such products, Sideco added. Furthermore, it will allow Nokia to concentrate more on consumer-oriented innovations like the user interface, services, applications and the industrial form factor.

Furthermore, by adopting Qualcomm's standard silicon, Nokia will be freed up to focus on design and IP related to ASICs compatible with next-generation 4G standards.

Supplier diversification

With the Qualcomm announcement this month, Nokia has taken another step in its effort to diversify its supply base. From once mainly using TI baseband silicon, Nokia over the years has added new suppliers, most notably STMicroelectronics, which recently formed a joint-venture with Ericsson dubbed ST-Ericsson. Nokia's increased business helped STMicroelectronics to increase its share of global broadband semiconductor revenues to 13.3% in 2008, up from 7% in 2007.

The company also has made increasing use of Broadcom silicon.

"Whether Qualcomm enjoys a major market share bump like STMicroelectronics due to this Nokia deal remains to be seen, but the company is likely to realize gains from finally being able to partner with the world's largest mobile handset brand," Sideco said.