No kidding Nokia

Wednesday, August 8, 2007

Today saw another announcement that signals the consolidation of the chip-set market. Nokia (NOK) has pulled out of the business with a renewed emphasis on the modem technology and other business areas it considers its core competencies. The move, on the cards ever since it exited the CDMA business a couple of years ago, is good for Nokia for several reasons including-
  • efficient use of its own engineering resources in developing its platform and the modem rather than fighting it out with the likes of QualComm (QCOM) who demonstrate engineering market leadership time and again.
  • being able to pick from a consolidated pool of suppliers thereby getting a better pricing that would enable them to compete more effectively on hand-set pricing.
  • the further snubbing of QualComm and potentially weakening the chip-maker's position.
  • lesser involvement in the standardization activities since they will be a level removed from the core technology.
Other effects that the industry will feel are

  • reduced profit margins for QualComm due to more competition.
  • a new player in the 3G space, namely ST Microelectronics, which has its first design win with Nokia.
  • a further enhancement to BroadCom's position as an emerging mobile wireless chip-set leader with the EDGE design win.
  • a jolt to TI who were hoping that STM was more a threat by Nokia than a reality but have instead landed in an unenviable situation fighting competition to get to Nokia.
  • a re-alignment on the cards in 3G standardization activities with Nokia shedding its dual interests.
  • a potential for future design wins for the likes of Interdigital who are developing GSM/WCDMA chip-sets.
Overall, it is good news for Nokia, STM, BroadCom, Interdigital (perhaps) and more importantly, the paying public since they will potentially have more to pick from in the low and ultra-low handset segments. It definitely bad news for QualComm, TI and indirectly Ericsson as well.


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