Wireless Industry Analyst

The iPhone 3G or V2 will come out and it is a matter of time now. I have, in previous articles, talked about the various options that Apple has for its baseband solution and for the other features. And my personal favorite, at least in terms of providing a truly well-engineered product, down to the nuts-and-bolts, is QualComm (QCOM).

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 -

While I am quite positive that Infineon and Apple are aware of the IP issue and are looking to circumvent it or at least decrease the impact, I am equally sure that QualComm will litigate if it is not paid its dues. From QualComm's perspective, if the IP is all it has to grab a portion of this sumptuous pie, why would it budge?

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.

Seems like Motorola has bowed to investor Carl Icahn. The company announced today that it will go for a "structural and strategic realignment" to separate its loss-making mobile division from the rest of the company. This includes possibilities of a spin-off or even a sale. This is something that Mr.Icahn, a 3.3% Motorola stake-holder, has been advocating for sometime now.

You can read some opinions and analysis in this reuters report. While this is not necessarily surprising in the wake of Mr.Icahn's position, I do wish to note a few points -

I will key in further thoughts as they come to my mind. But it will be an interesting next few months for the wireless industry.

While the wireless industry as such does not want to believe that a single phone is capable of changing its dynamics, none of them are willing to risk it by betting against Apple and iPhone. They argue that Motorola with its RAZR only bit dust running into losses and laying off 3500 employees world-wide. But then, on the other hand, they are not able to ignore the force of evidence: Steve Jobs has hard-balled his way into profit-sharing with Cingular, a hitherto unheard-of practice in the industry. If a carrier can come around to believing that the iPhone can change their world, the decision-makers at the chip-set companies are unlikely to risk being left behind.

And so the story is, everyone who is a some-one in the 3G world wants a part of the iPhone pie. While this may be the desire, the eventuality may be too much for most vendors in this fragmented space to achieve. Very few have the capability to produce integrated chip-sets or even have the R&D budget to work on that and the power management aspects. These differentiators are likely to widen the rift between the top-of-the-line vendors and the others. For example, Agere that was acquired by LSI logic was working on a 3G chip. They will now have to work hard to get GPS and Wi-Fi capabilities, if they ever can. The situation is further accentuated by E911 being made mandatory. Realistically speaking, that leaves us with a few candidates at this stage unless something significant is in the cards for the next few months.

Infineon (IFX) deserves first mention since it already has a design win with Apple. Seemingly, it has a cheap solution which meets Apple's expectations on the power management-side. The next few days will further serve as testimony for the company. The customer satisfaction with the modem performance will either justify or put to death, Apple's confidence in Infineon. This being said, Infineon does not have a proven 3G solution on its own. However, Interdigital (IDCC) has a cross-licensing agreement with Infineon to be able to develop dual-mode chip-sets for GSM and WCDMA/HSDPA (but not extensively field-proven either). Interdigital, on its part may hope to use the iPhone and Infineon's relationship with Apple to wedge their way into V2. While, Infineon would gain licensing fees, a deal along these lines may auger very well for Interdigital. Long-known for the cut-throat IP litigations against Nokia and the other biggies, Interdigital seems to want to hit it big even in modem development. If it can strike a deal with Apple and also other smart-phone vendors, Interdigital may be on its way to getting a part, albeit a small one, of the cellular pie. After all, unless a transition happens it is very difficult for Interdigital to survive with the one-time IP license/litigation model. The biggest draw-back of the Infineon-Interdigital combination however is their lack of GPS or Wi-Fi capability. If Apple opts for either one of them, the iPhone will have to again seek separate designs for the Wi-Fi part, something to keep in mind given the power optimization and the other improvements sought moving forward.

In the next part, we will look at the other horses in this race

Aha, here goes..

http://www.icerasemi.com/release.php?newsID=42

So let me add one more company to the already long-list of suitors that I have put up in this forum. Welcome icera semiconductors!

It is almost as if the company gels with the Apple brand rightaway with the latter's trade-mark 'i'! Jokes apart, icera has been talking for a while about having the industry-best HSDPA solution. And now they claim that an independent industry evaluation has come up with the same conclusion. They are indicated to be better than QualComm's next generation MSM7200. What is more, their Livanto® wireless soft modem, as the name indicates is completely software-centric. This is again something that Apple will like since they can then potentially look at designing a universal solution which does not need a different base-band chip for different regions. And that is not all, they offer dual-mode 2G/3G capabilities currently making them a ripe candidate fo V2. Their claims about lower power consumption is also a great plus.

This being said, icera only offers a 3GPP solution. So Apple, if they want to enter the CDMA2000 evolution path, would currently have to look beyond icera, presumably QualComm. But nothing prevents icera, with a guarantee from Apple, to license the CDMA IP from QualComm and develop their own solution using the know-hows from their WCDMA development. The second draw-back of course is the lack of an integrated Wi-Fi and GPS chipset. Another fine-point is that the performance demonstrated is for a two-antenna solution while Apple V2 is likely to be a one-antenna solution. So after all, their best-performing modem may not be compatible with Apple's plans. Nonetheless, they seem to have the capabilities to switch to the other receiver which should serve the iPhone's purpose. Also, my point is that if the solution is feasible for Apple (I mention feasibility because I am not sure if icera will have the economy of scales to match the bigger bidders in the pricing wars), the latter is more likely to retain the flexibility of a software upgrade for other softwares while also obtaining cheap Wi-Fi and GPS licenses from either their existing customers or their cut-throat competitors.

It seems that icera has something unique to sell. They may be rightly positioned to supply base-band capabilities to a lot of the smart-phones of the future. Most notably, a contract from Apple can make this UK-based soft-radio company the next hot property in wireless.

In the first part of this article, we discussed Infineon (IFX) and its partner, Interdigital(IDCC). Let us proceed to check on the bigger competitors.

QualComm (QCOM) is on the other side of the spectrum. With its acquisition of Airgo, it now has GPS, WiFi and Bluetooth capabilities ready to be integrated with its mobile solution. I believe that's what it is touting its Snapdragon platform and its future HSPA chips: the one-stop shop for cellular chips. This is a very attractive proposition for Apple and with a QualComm chipset, the iPhone could be a killer. While the performance superiority may be established beyond doubt, there are other issues that dog this potential alliance. For one, there is the ITC ban on future QualComm chipsets. This means that unless the issue is settled with BroadCom, iPhone with QualComm may well be a non-starter especially with the time-scales for the 3G version. So, QualComm is very likely anxious to get the ban out of its way for more reasons than obvious, with iPhone being a prime motivation.

Another issue may be leverage. Both players are traditionally 'leverage-seekers'. While Apple would prefer to have a complete control on its phone design and obtain it at a cheap cost, QualComm will strive to obtain maximum leverage out of its single-chip solution and all the IP in the chip. Apple may sacrifice some performance for a degree of flexibility and better position in the race. To me, the thought of these two heavy-weights tying the knot and the dynamics that result in and from such a deal is almost indescribable though it can only mean good things to the paying customer. In fact, the more I think of it, the more problems I see. Just as any marriage, this one will have to be about compromises from both parties, and substantial ones at that. To start with, however, Apple will have an upper edge since it gets to choose.Also, strategically, it may be more important to QualComm that the iPhone comes through.

Talking of strategic importance, an iPhone deal may be a life-saver for others. Let us take BroadCom (BRCM) as our third candidate. It is on the other side of the ITC ban. Also, with its recent acquisition of Global Locate, it is claiming the industry-first capability to integrate mobile with WiFi, GPS, Bluetooth and also FM. So, if the modem performance can be proven to be competitive with respect to the QualComm chip and also relatively glitch-free on the inter-operability side etc., then it is quite possible that BroadCom may pull another one on QualComm. In such an eventuality, BroadCom may do great by accepting free cross-licensing from QualComm as part of the post-ITC ban deal. Though it is difficult to accurately predict what exactly cooking, a success here may give the long-ailing mobile program at BroadCom its much needed impetus and help the company get the coveted third spot in the suppliers list.

Marvell may emerge as a dark horse contender as well with its mobile, blue-tooth and Wi-Fi capability. GPS has the potential to hurt its chances but my guess is that there are partnership initiatives in place to address this weakness. It is also possible that it is eyeing an acquisition much along the lines of BroadCom's. A sore-point, however, for Marvell is that it has been mired in its own internal problems with stock-back-dating etc. With the powerful Weili Dai being relegated, the Marvell ship seems to have lost a good part of its rudder and has since been stuttering. The iPhone however may be seen as a medium to resurrect and rejuvenate the company. If a major design win gets through for the next version, the past mistakes may soon be forgotten.

And then there is the possibility that Apple will still take the separate chip approach, though it is not an ideal situation. For cost and leverage reasons, Apple may select this route letting various players to again compete for each of its features, perhaps for pairs of features. We may well see some if not all players mentioned here and perhaps others as well achieving design wins for v2.

We may never know officially what is in there, given Apple's propensity to keep a tight lid on things. But it is quite possible to guess. So either Apple will tell, or time will!