Inside the 3G iPhone - revisiting my predictions
Sunday, July 13, 2008
Here is the photo of the iPhone 3G chipset as dissected by TechOnline -
Prediction #1: As this photo indicates, Infineon emerged the cellular chipset winner. The analysts are not sure if it is the PMB 8878 since they had no way of comparing the iPhone component with a known sample of the Infineon 3G baseband offering. They found that the baseband was a two-chip, single package solution. They further identified it as the 2G chip and a 3G accelerator.
For the moment, I have no reason to suspect that this is anything butthe PMB 8878. I don't believe that Infineon would have a chip customized for Apple. On the other hand, the company perhaps quickly cobbled together a 3G solution in the form of a two-chip PMB8878 to cater to the market needs (including those of Apple.) Given the long cellular product cycle and the tight iPhone schedules, this would have been the path of least risk as compared to spinning single chip solutions. For the record, Infineon recently announced smaller and more sophisticated 3G solutions with its own software stack. These latest chips (that are not in the iPhone) are likely the more thought out, and more optimal single chip UMTS solution.
The two-chip solution inside the iPhone 3G further brings back the question I have been asking for a while now. Does the 3G IP in Infineon partially or wholly belong to InterDigital? It could well be that the iPhone has many if not all elements of the SlimChip IP from InterDigital. Apple's license with InterDigital last year will then have deeper implications than the normal 3G license that the King of Prussia-based company seeks from handset vendors.
While the exact details will emerge in the coming days, my prediction #1, "Infineon will be at the heart of the iPhone. " has turned out to be true.
Prediction #2: "Samsung will perhaps continue to own this part. " Not much surprise here as the iFixit teardown revealed last Thursday. Prediction #2 was true too.
Prediction #3: Before we discuss WLAN and Bluetooth, here is a second picture from TechOnline -
So, as it turns out, Apple yet again went with Marvell for WLAN. Prediction #3, "For platform stability issues, I will bet on Marvell grabbing this socket again." was right.
Prediction #4: "If WLAN belongs to Marvell, CSR, which is in the current iPhone, will likely own the Bluetooth socket again." A look at the figure above will make it 4 on 4 so far.
Prediction #5: The 3G iPhone carries the Hammerhead II GPS solution co-developed by Infineon and Global Locate, the company that was bought by Broadcom last year. So, that makes my prediction #5 - "The next generation will have GPS and it will likely belong to Broadcom" - right too. I don't know the specifics of the licensing agreement between Global locate and Infineon. So, I will not be able to comment on whether BRCM will benefit from this component, if at all.
Prediction #6: The touchscreen controller belongs to Broadcom as well.
In summary, all six iPhone predictions I have recorded in this blog have come out to be true. As you can see, I based my prediction on most of these components on the rationale that Apple will not want to hamper the stability of the 3G iPhone by testing out new components in a short time span. As it turns out, most of Apple's component decisions were based on this very logic and is aptly pointed out by the TechOnline article.
[PS: For a more thorough look into the component dissection, please visit TechOnline's site]
[Disclosure: Long IDCC at the time of writing]
Disclaimer: All thoughts expressed by Vijay Nagarajan in his articles are his and do not necessarily reflect those of either Atheros Communications or TensorComm Inc.
InterDigital - Thoughts on the ITC staff report
Wednesday, July 9, 2008
The staff attorney assigned to the InterDigital-Samsung ITC dispute favored Samsung in his report. His position that there is no violation calls for rejecting InterDigital's proposal to ban disputed Samsung products in the
Firstly, while the staff report is an unbiased third-party opinion on the case, it is still only one instrument for the Administrative Law Judge (ALJ) to decide. The judge is yet to hear both companies' positions. The staff report is not binding on the judge. There is precedence in the past where the ALJ has acted against the staff recommendation. So, while InterDigital has lost some positioning in this case now, the staff recommendation is certainly not the end of the road for this ITC dispute.
Secondly, contrary to what I alluded to in my last post, an unfavorable decision by the ALJ will only reject the call to ban Samsung phones in the US. Besides, one theory is that a 'no violation' decision may be the result of the staff attorney finding that this is a licensing dispute that has to be amicably resolved between the parties without warranting a ban.
Thirdly, and perhaps most importantly, InterDigital has many more things going for it beyond the ITC dispute. Most notably, the company has already licensed to Apple and RIMM, both of whom are battling it out in the smartphone market. It is also very likely to be a beneficiary of the 3G iPhone to be released shortly. Ironically enough, Samsung sources 3G chipsets for some of its designs from Infineon. These phones will hence use InterDigital's 3G protocol stack and, like the 3G iPhone, contribute per-unit royalties to the King of Prussia-based company. You can find more about InterDigital's products and strategies here and here.
Finally, for the curious minds who are wondering what will happen to InterDigital's valuation if the Samsung case goes against it, I will direct you to my February 2008 valuation post here. A nominal assumption on the total royalty money gave me a $75/share valuation then. You can look at the revenue impact of the royalty rate replete with graphs there.
In summary, I feel that the sell position taken by many investors is understandable. InterDigital is a volatile story stock and the ITC staff report did little to buttress investor confidence. On the other hand, a 25% drop seems unwarranted in the light of a) lack of enough information given that the case is still in its preliminary stages and b) many other developments to look forward to from InterDigital.
[PS: Thanks to all the readers who responded to my previous post]
[Disclosure: Long IDCC at the time of writing]
Disclaimer: All thoughts expressed by Vijay Nagarajan in his articles are his and do not necessarily reflect those of either Atheros Communications or TensorComm Inc.
InterDigital - Samsung ITC case
Tuesday, July 8, 2008
This is not a great development for IDCC. The downside is that if the ALJ upholds the staff's recommendation, then IDCC will lose any right to collect royalty from Samsung in the US. This will also likely percolate to its ITC case against Nokia creating a domino effect. This being said, the dispute still has a long way to go. Both parties are yet to make their respective cases.
For the moment, I am looking for more clarity in this matter. I would appreciate it if readers can provide any information that can be disseminated to educate others here. Please send me emails through the contact form. I would especially appreciate insights on the actual proceedings, court reports etc. that can go beyond what is being commonly reported.
More updates to follow as I come to know more!
[Long IDCC at the time of writing]
Samsung multi-sources 3G now
Thursday, May 29, 2008
The move away from Qualcomm is significant on at least three counts. Firstly, it suggests that as much as performance is important for data networks, the competition has succeeded in narrowing Qualcomm's lead there. Secondly, the lower cost of Infineon's solution speaks well of the company's IP position. Thirdly, it expands InterDigital's 3G product footprint.
It is bad news for Qualcomm. One of the key reasons for Samsung's move is that it found a viable performance alternative for a cheaper price. That underscores the issue for Qualcomm. Until now, the company was charging a premium for its superior performance and its support network. However, as a recent Signals Research Group report points out, there are at least three other solutions with comparable performance in the market today, Infineon being one of them. These alternatives become attractive if the handset vendors discount Qualcomm's reliability and support.
It is good news for Infineon. The company is expected to be central to the 3G iPhone. With design wins at Samsung, the German semiconductor company will grow its 3G market share at the expense of Qualcomm. With the lower overhead coming from its comfortable IP position, Infineon can afford to undercut Qualcomm's pricing to gain further traction.
It is better news for InterDigital. The company supplies the 3G software stack for Infineon's solutions and stands to make money off every 3G Infineon chipset sold. So, while the King of Prussia-based company is involved in a prolonged legal battle with Samsung on IP issues, this will open up another channel of revenue from the Korean handset maker.
InterDigital's SlimChip, though one of the best, has not got substantial direct traction in the market. On the other hand, the company, through its alliance with Infineon and its product IP core licensing initiatives, is looking to expand its footprint at a fast rate. Apart from the Samsung design win, I am particularly curious how 3G will play out between STM and Nokia. (Stay tuned for an analysis of how InterDigital may benefit from the STM-Nokia relationship in the wake of recent industry events.)
In summary, Samsung has reiterated the move towards multi-sourcing. Like some of the other wireless segments, pricing and time-to-market will likely drive mobile baseband as well. That is if Qualcomm's competitors can stand up to its deep pockets and deliver consistently.
Interdigital - Nokia talks signify changing fortunes
Monday, March 24, 2008
Interdigital reported that it was in settlement discussions with Nokia for 3G and that the parties have made substantial progress' towards a resolution on all the patent disputes between them. A bigger positive about this piece of news is that it was reported as an unscheduled material event or corporate change through a Form-8K. The news was further ratified by a Nokia spokesperson who declined to add more color to it.
The Wall Street reacted very favorably to this information as the company's shares soared almost 15% to close at $22.31. The last trade for the day was in fact at $22.80. This also ended a two-month rut for Interdigital shares that were trading in the high-teens.
That a Form-8K was used signifies a positive end to this prolonged battle with Nokia. It also suggests that the King of Prussia-based company is quite confident, perhaps about a favorable licensing deal. Besides, with a stock buyback plan in progress, the company will also want to play safe. It will certainly not want investors complaining that the buyback is unfair (if a Nokia settlement is not made public).
On a related note, Interdigital also stated in the 8K that it will appeal against a court order seeking that it enter an arbitration with Nokia. It will also continue to participate in the ITC investigation against Samsung. It now appears that Nokia likely in tow, Samsung and the others will soon follow suit and Interdigital will be presented a chance to prove its real worth to the Street.
[Long IDCC at the time of writing]
Motorola's Icahnic move
Thursday, January 31, 2008
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 -
- The largest US handset maker may potentially get acquired by an Asian/European competitor. This can weaken US's position in the wireless/telecommunications industry. Further, its position as the US market leader is an extremely attractive proposition to other vendors.
- In the case of an acquisition by a non-US company, I can see QCOM's position strengthen internally. As a handset vendor, Motorola had vested interests in keeping QCOM at bay in the wireless standards. If the company ceases to exist in this space, then QCOM will likely get unconditional backing from the US wireless industry and perhaps the government as well.
- With Nokia unlikely to be a buyer, it is further good news for QCOM in terms of increasing its market share. If it is any indication, the recent announcement from Motorola that it will go with QCOM 3G chipsets may be a deliberate positioning effort to bring in more suitors. LG or Samsung will perhaps be most ideal for QCOM's fortunes.
- Chinese vendors who are having a growing clout in the industry, may post heavy bids to emerge as bigger forces effectively redefining the industry's geopolitical alignment.
- I can also think of dark horses like Google as buyers.
- While a spin-off itself may be good for the other two profit-making ventures, it will also enable the new entity to focus on winning back some market share.
Xohm Shanti Xohm
Friday, November 16, 2007
In a month-old article titled "Forsee out: Will Sprint still Xohm or is UMB back?, I had stated reasons why Sprint may no longer see Xohm attractive post-Forsee. Sure enough, we are seeing its ramifications already. This retro-step is simply an indication of Sprint's commitment as a company to WiMax roll-out. It perhaps wants to so it can gain a leadership position for 4G. Unfortunately, at the current moment, there is no economic case that its investors see. Though it is still likely that Sprint will continue its roll-out efforts, this means that the pace of such a roll-out itself will be slow. There are a few comments I will make here -
- Tough times for Mobile WiMax means a field day for the proponents of the other two competing 4G technologies, UMB and LTE. With its existing relationship with Qualcomm, Sprint may migrate to UMB as and when there is a demand for 4G speeds in the market. On the other hand, LTE is very much in the running, especially if all competitors opt for the technology thereby driving their respective costs down.
- Sprint's focus will now be to secure the customers and build a better brand image to stabilize the future. What is the point of investing billions if it cannot guarantee a loyal customer-base!
- Companies like Motorola, Samsung and Intel that have vested interests in the success of mobile WiMax may now step in and be more proactive with the roll-outs, especially with Clearwire. Sprint perhap is also hoping that some posturing can help drive the WiMax costs down as well.
QCom - A loss... and a win
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.
Read the full article>>Inside iPhone - no surprises
Tuesday, July 3, 2007
As analysts and technology enthusiasts rush to dissect the iPhone to unravel the 'closely-guarded' secrets of the chips inside, it does not come as a surprise to me. To most wireless insiders, putting two-and-two together should have been easy. In most of my blogs, I have been taking for granted that the Infineon GSM chip is inside. The other component chips were also fairly guessable based on public stance of some of these companies and general word-of-mouth.
So, though it comes as a confirmation to those dis-believers, its a fairly redundant one at that. To me what is interesting is the iPhone V2 going forward. That is where the guessing game should be. So, all the hoopla about shares of these chip-makers going up are ratifications of the truth, as I have pointed out in my previous articles, I would not be bullish about most of these companies based on what they have in there today.
For the uninitiated, Infineon's GSM chip, Marvell's Wi-Fi, Samsung's memory and BroadCom's controller chip are in the iPhone. Intel, TI and National also had a share of the pie.
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