Wireless Industry Analyst

Firstly, IDCC will get licensing fees from Apple as per agreements signed last year. The agreement covers 2G and 3G iPhones to be sold in the near future. So, irrespective of whose 3G components are in the iPhone, IDCC gets money from Apple.

Secondly, there will be money coming if Infineon’s 3G baseband is in the iPhone. In light of the recent product announcements by Infineon, I need to be careful when I make that statement. So, let me step back and reflect on the impending 3G iPhone. I wrote in the past that I expect to see the MP-EH platform with the S-GOLD3H baseband chip in the 3G iPhone. The company has rechristened its products since. The HSDPA capable MP-EH platform is now the XMM 6080 while its 3G baseband chip - PMB8878 - previously known as the S-GOLD-3H (H indicating HSDPA capability) is now the X-GOLD 608. Read more on this subject here and here.

Further, the 3G software stack that will be used in the MP-EH/S-GOLD3H combination was jointly developed by InterDigital and Infineon’s subsidiary Comneon. So, IDCC will get per-unit royalty from Infineon for use of the stack. While the software collaboration is public, I am inclined to speculate based on recent modem performance data that IFX 3G chips use some baseband receiver design IP from IDCC. This can be an additional source of per-unit royalty for IDCC.

Recently, Infineon announced an array of X-GOLD61x HSDPA/HSUPA products that drastically reduce on power and space apart from catering to multiple phone market segments. Furthermore, the company also announced specifically that the stack for the X-GOLD61x solutions is internally developed. While this announcement gives more design control to Infineon, it implies that IDCC will not receive per-unit royalties for the software stack on the 61x series. On the other hand, I am still bullish (read speculation) about the use of IDCC’s physical layer receiver IP in all of Infineon’s 3G offerings. Also, while I think these new products are part of Infineon's push to hold on to Apple for future designs in the face of increasing competition, I would be greatly surprised if I see any of these 61x chips in the first 3G iPhone.

In summary, look to see if the iPhone teardown reveals Infineon’s PMB8878/X-GOLD 608/S-GOLD-3H baseband. So, the best case scenario for IDCC is for the iPhone to have a heart of Gold! Even otherwise, the King of Prussia-based company will gain from Apple’s licensing fees.

[Long IDCC at the time of writing]

The IDCC-NXP connection: NXP has licensed IDCC’s 3G HSDPA ASIC design for its PNX6712 chip. The companies entered into this agreement for integration into NXP’s Nexperia cellular chipsets as early as August 2005. Talking about this during InterDigital’s 1^st quarter 2008 conference call, its CFO Scott McQuilkin said, “We also completed our delivery of HSDPA technology to NXP and ASIC is now moving into production.”

The NXP-STM connection: STM and NXP entered into a JV last month merging their wireless businesses to acquire scale. You can read my extensive coverage of this event here and here. The formation of a solid number three player stints IDCC’s abilities to sell its SlimChip solution directly. But in the bigger scheme of things, it spells good news for the King of Prussia-based company as the JV widens its footprint. In the most recent quarter conference call, IDCC’s CEO William Merritt resonated this point saying, “Frankly we looked at the combination of ST Micro and NXP and said, ‘Great, they’re getting stronger and they have our IP’ and we love our licensees to be strong and pushing hard into the market..”

The STM-Nokia connection: Nokia last year decided on a multi-vendor sourcing strategy. It now sources 3G from both TI and STM. Additionally, it also transferred about 200 chipset design engineers to STM. This not only signals Nokia’s move away from chipset design, but also presents STM with the opportunity to grab more 3G business at Nokia. It is devoting R&D resources to baseband design and NXP’s team and product are an active part of the equation.

The performance conundrum: Data communication necessitates a better receiver design. Despite the design resources from Nokia, STM will take time to build a competitive solution on its own. On the other hand, the design that NXP has licensed from IDCC is one of the top-performing receivers today. Nokia cannot afford to lag in 3G performance especially considering its high-end mobile market competitors have good solutions. Samsung sources from Qualcomm and Infineon while Apple is expected to have an Infineon chipset in its impending 3G iPhone. So, for the moment, the IDCC design seems to be the most accessible ‘best’ 3G solution for Nokia.

In summary, as STM continues its 3G ramp up, it may use NXP’s design in its platform in the short-term. IDCC, by virtue of its license agreement with NXP, will directly benefit from this move. What is more, this will give IDCC a chance to be part of Nokia phones. Now, that begs another question. Are IDCC and Nokia factoring this in their licensing discussions?

Firstly, Sehat Sutardja, Marvell’s CEO, had this to say in the company’s F1Q09 conference call –

“During the first quarter we achieved what I believe to be a very important milestone as we began volume shipments of our HSDPA communication processor to a key smartphone customer. We expect a steady ramp to high volume production throughout the remainder of the year.”

With the name of this ‘key smartphone customer’ not revealed, Apple and iPhone immediately got tagged to this remark. To me, the matter-of-fact statement appeared to reflect Marvell’s continuing relationship with RIMM.

The latest Blackberry Bold 9000 features Marvell’s Tavor platform. Tavor is a single-chip solution that combines a HSDPA baseband processor with a 624 MHz applications processor. The timelines of the Bold launch and Marvell’s shipment dates seem to corroborate as well. The RIMM angle, coupled with the difficulty in launching and testing a new platform with Marvell for the existing form-factor iPhone makes me believe that the Santa Clara-based company will not displace Infineon in Apple’s darling phone.

I will, however, not dismiss the possibility of Apple launching a second, smaller form-factor 3G phone with Marvell’s solution. Marvell’s Tavor may be ideal for a low-cost phone from Apple. The single chip will eliminate the need for a separate application processor. It will save space and power. Hence, it (or any single chip solution for that matter) will be a preferred solution a low-cost iPhone, if there is one. I also anticipate that Marvell will be able to bundle Tavor with its WiFi solution giving it a price advantage. So, in the eventuality of two iPhone models being launched, it is possible that both Infineon and Marvell have design wins at Apple.

This brings me to the other iPhone related news – the Infineon warning. The German company recently warned that it has received lower than anticipated orders for a project to supply HSDPA chips. Going with the premise that Infineon is indeed the 3G supplier for the iPhone, it is hard to tell if this warning pertains to Samsung or Apple or another customer. If it is for Apple, then, contrary to what is being written elsewhere, I don’t think it signifies any major delay in the anticipated launch of the 3G iPhone.

This may, however, signal one of two things. The first possibility is that Apple may not market the 3G iPhone as widely as anticipated (at least initially.) The second possibility, which ties up with the Apple angle to the Marvell statements is product mix. Apple may be planning on a staggered, complementary launch of two 3G iPhone models. This, in turn, could be the reason behind the lower volumes shipped by Infineon and the perceived secrecy associated with Marvell’s ‘key smartphone customer.’

In summary, I think Infineon will be in the 3G iPhone. While I feel that Marvell’s statements pertain to RIMM, I also see the company as a very good candidate for a second iPhone design that may also launch soon.