Tuesday, September 25, 2007
- The platform used was Infineon's MP-EU. This platform supports UMTS (3G WCDMA FDD).
- Contrary to a myth, the iPhone does not support 3G that can be enabled by a software switch. The chip used, SGOLD2-8876 is only capable of EDGE (a 2G enhancement). So, despite the platform's capability, the iPhone is limited by the chips in it.
- MP-EU has Interdigital 3G protocol stack and baseband design and the King of Prussia-based Interdigital stands to get royalty for every 3G phone using the platform.
- The 2G protocol stack is from Infineon itself but there is potentially some Interdigital IP involved in the chip+platform even without 3G. The license is retro-active to the day one of iPhone implying 2G royalty.
- The total cost of MP-EU and the 2 IFX chips in iPhone is speculated at close to $16.
Monday, September 24, 2007
- The $2 million increase in the guidance that seemingly is the basis behind the $56 million calculation may after all be royalty for the 2G phones sold through this quarter.
- On the 3G front, the royalty from IP itself may be higher, so that number may increase next quarter and beyond.
- Most importantly, in the event of Infineon getting the design win, iPhone will be using substantial contributions of Interdigital from both the software protocol stack and the design. Besides, Infineon has a per-chip royalty agreement for these two pieces.
Friday, September 21, 2007
The iPhone currents, on the other hand, seem to be moving away from QualComm if rumors are to be believed. Apple may opt for the Infineon (IFX) 3G chip (incidentally, my first mention in the iPhone V2 suitors). What may have prompted the Apple (AAPL) decision needs a separate analysis by itself. In this article, however, I wish to discuss where it leaves QualComm.
Is this bad for QualComm? Yes, and no. Yes, because it is not partnering with a handset vendor with an increasing market share. The No-part is a little less obvious but here are my reasons -
- QualComm's legal battles with Nokia (NOK) and BroadCom (BRCM) and the impending ITC ban: Based on the final rulings in much of these cases, QualComm chips may not be allowed to enter the US in the future and this will include an iPhone if it features such disputed chips. Besides, the royalty that it may have to pay the other parties may cut down the margins substantially on a per-chip basis. This is true in general, but a bad publicity with a highly visible product is the last thing the company wants.
- WCDMA royalties: If a 3G iPhone is available in 2008, about 2.5 million units will be sold that year. This number is expected to climb to about 17.5 million units in 2010. With a conservative average selling price of $350 and a royalty percentage of 6% (especially if Infineon does not have any underlying license deal), QualComm stands to make close to $50 million next year and as high as $340 million in 2010 just on iPhone sales. Compare this against $@ million a quarter, 7-year deal between Interdigital and Apple. This number appears exagerrated, but unless Infineon is able to work around the IP issue, the numbers stand.
I will also write about Infineon and its partner Interdigital (IDCC) in my next article. For now, I will let you chew on this one. For the mathematically minded, if I get a request, we can discuss my numerical methodologies.
Besides this, both LTE infrastructure and handsets are expected to be cheaper despite similarities in technology and deployment. There are three reasons for this -
- There are many more vendors in the LTE space. Ericsson demoed an LTE solution earlier this year. Other infrastructure vendors are already working towards this. Even QualComm(QCOM) is actively working on LTE prototypes and products. The competition is expected to keep the average selling price (ASP) on either end lower than in UMB which is dominated by QualComm on the handset side and a few players on the infrastructure side.
- Licensing and royalties will be lower in LTE due to the diffused nature of the IP. Compare this against a proprietary UMB that will have QualComm alone laughing all the way to the coffers. This again will have an impact on the ASP.
- With Sprint-Nextel already putting its weight behind WiMax, the demand for UMB will be much lower resulting in higher costs again.
- LTE is not a GSM technology, it is rather an evolution of the GSM standard
- WCDMA/HSDPA that serve as the link between GSM and LTE is based on CDMA physical layer. In other words, the core over-the-air interface is similar in flavor to CDMA2000
- UMB is not CDMA-based, but is rather an evolution of the CDMA2000 standard. In fact UMB and LTE are based on the same underlying Orthogonal Frequency Division Multiple Access (OFDMA) technology.
- This may be bad for UMB, but not entirely for QualComm.
- Irrespective of whether UMB or LTE, or for that matter, WiMax wins, at the end of the day, CDMA as a technology is on its way out and even QualComm knows this.
- Since the migration to UMB or LTE will have involved similar infra-structure overhauling, it makes sense for Verizon to go with LTE (I will elaborate on this in a subsequent article)
Wednesday, September 19, 2007
- The 3G version, as I have already mentioned, suffers from a costlier chip also. The average price per 3G chip is closer to $25 as against single digit numbers for the Infineon chip in the iPhone today. Besides, the royalty structure for 3G amounts to about 28% of the average selling price of the 3G phone. Apple typically keeps its cost constant for more features. This will imply reduced margins from iPhone V2
- The power consumption issue does open up the question of who the baseband supplier will be. Will it be QualComm (QCOM), which has made strides in power management since iPhone V1? Will it be Infineon that has been confirmed to be developing UMTS (3G) baseband chipsets for atleast 2 companies? And if so, where does the recent licensing deal between Apple and Interdigital (IDCC) fit in?
- Who will supply the A-GPS capability for the iPhone?
- Would iPhone V2 be HSDPA-enabled?
Wednesday, September 12, 2007
Few points to note -
- Though absent from the beneficiaries list, Sprint will be able to sell phones from any of the manufacturers who won the stay today.
- QualComm chips cannot be imported directly into the US. Not a major issue, but highlights the fact that this stay merely seeks to limit the damage caused to the others.
- QualComm does not have to settle with BroadCom and will perhaps let the law take its course.
In other QualComm news, their case against Nokia went to courts yesterday as well. So, there will be more interesting legal outcomes this year. One thing that I want to re-iterate is that this ruling will not hamper the ruthless efforts to break the company's business model. Even the phone-manufacturers who won the stay will want more competitors in the chip-vendor space. Note that Motorola, one of the beneficiaries is already moving away from QualComm.
More analysis to come soon.
Tuesday, September 11, 2007
Sunday, September 9, 2007
The 'Yes' list
- The touch-screen that was the iPhone's identity
- Wi-Fi, allowing internet access through the 'Safari' browser with custom yahoo and google functions.
- Music download from Wi-Fi hotspots at Starbucks locations
- Digital Radio
- Flash drives of 8 or 16 GB
The 'No' list
- Of course, the phone part of iPhone
- A microphone
- A bigger hard-disk
- Wi-Fi had to come: The iPod has to compete with Zune features and allow for wireless download of music
- Flash Drive, the power saver: The flash drivehas been used to compensate for the power-hogging Wi-Fi feature. The 'Touch' advertises 22 hours of music playback or 5 hours of video playback. Makes sense!
- Wi-Fi browsing: The Safari browsing experience is likely to be a paid service. If so, then the primary use will be limited to the business population and the intended reach of the device will not be as fast. On the other hand, the easy-to-use interface along with the mobility may have people willing to spend if affordable.
- The microphone: With a microphone, it can be used as a VoIP phone along with the Wi-Fi feature. There were perhaps 2 reasons for its absence. Apple, wants to maintain a good relationship with the carrier community, especially considering it is yet to globalize the iPhone. Secondly, my suspicion is that the GSM chip from iPhone is still in place in the iPod touch. Although it makes economic sense for Apple not to spend design cycles for an iPod that is essentally an iPhone clone, the presence of a microphone will let hackers enable the phone feature as well at no cost.
Looking ahead, the next generation of iPod touch (not knowing when that will come) will have -
- Free browsing on Safari, or at least cheaper and more affordable services with a wider range of applications
- Bluetooth 2.0 or higher, perhaps integrated with Wi-Fi chips
- The microphone will come once the iPhone obtains a stronger foothold. VoIP calls from home or hot-spots will become popular, especially when integrated with a sleek iPod.
On a personal note, I am undoubtedly thrilled. I wanted to get an iPhone but did not think the phone part was worth it. So, apart from the Flash drive, the VoIP feature looks attractive for the future, but I don't think I can wait to get 'touched' by this new gadget from Steve Job's garage.
Tuesday, September 4, 2007
That is the caption for the special Apple event tomorrow. Its stocks have risen 12.5% since August 28th and I think it is for a good reason. While the internet is abuzz with speculations about the announcements, I do anticipate one thing for sure: The new iPod.
The iPod has to come for various reasons -
- There has been a rut in both iPod innovation and sales growth over the past couple of years. It is high-time Apple re-invents the product.
- The iPhone was an Avatar of the iPod but with phone capabilities. Steve himself announced that it was the most powereful iPod as yet. It makes sense that Apple should give the market a stand-alone non-phone version of such a gadget as well. Besides, its innate ability to surprise not with-standing, Apple should cater to customer demand and anticipation of features such as wide-screen, touch-screen etc.
- Wi-Fi is already in competing gadgets as the Microsoft Zune. iPod should not appear dated especially given that another of Apple's product already has such features. I do not think this will encroach the iPhone's market since the phone and its associated features (like the voice mail feature) have to be the USP of iPhone.
- Wi-Fi will open up avenues of using the iPod as a fixed wireless phone (with VoIP services) and would be a handy addition. The issue with Wi-Fi however is going to be battery life. Unless Marvell and Apple have worked a solution for that, this may be a bottle-neck.
- A Mac OS based iPod, again in line with the iPhone thereby helping it transition from just a music player to a PC-surrogate. This would open the gates to applications and features that make the iPod powerful.
- A flash version of iPod with less battery utility to compensate for the power consumption of the Wi-Fi chip.
In summary, Apple tomorrow will unveil a product-portfolio that is in line with its unique vision while trying to leverage the unshakeable market share of the iPod. It may well signal the further transition of mobile devices into omni-potent mean machines.