Wirelessly yours ...

So,the issue is the current turmoil or change or consolidation going on in the wireless chips industry.As you are aware of the tremendous growth that is going on in the wireless communication area in developing countries, and the potential remains largely untapped.For example,India ,currently, with only 185 million mobile connections in total,and adding somewhere 5 million connections per month and with only 2% access to mobiles in rural areas, provides a mind boggling opportunity.No doubt the penetration will increase with affordabilty of handsets and the tariff rates.
So,Let 's look at what has been happening around.
We are living in interesting times. The semiconductor industry is getting increasingly competitive. The wireless domain is seeing a lot of activity as seen in this quarter.
Nokia and ST microelectronics went into a agreement regarding the licensing and supply of integrated circuit designs and modem technologies for 3G and its evolution.
As facilateted by this multifaceted deal, (a) Nokia will license its 3G technology to STM.(Nokia has plans to license it to other players as well).This 'll enable STMicroelectronics to design and manufacture 3G chipsets based on Nokia's modem, energy management and RF (radio frequency) technology and deliver complete solutions to Nokia and the open market. (b)Nokia will be transfering its IC operations to STM which will concern nearly 200 Nokia employees in Finland and the UK, and is expected to take place during the fourth quarter 2007.Basically, Nokia will completely come out of the chip making business to focus more on its core competencies.
Nokia will continue to develop its modem technology, which includes protocol software and related digital design for WCDMA/GSM and its evolution. This modem technology will then be licensed to chipset manufacturers who will develop and produce chipsets for Nokia & also for the open market.
Nokia has increasingly sought to widen their chip supplier base as part of their business strategy (makes sense) & will have more than one supplier for all key parts of its phones.
It unveiled plans to develop Broadcom as a supplier of EDGE (Enhanced Data rates for GSM Evolution ) chips. This is a 2.5G standard. While Infineon will supply chips for GSM domain ,as announced early in this year.
Until now, Nokia has mainly relied on its own chips and on Texas Instruments.TI continues to be the only supplier across all wireless standards.With these developments Nokia aims to lower its R&D expenses.And TI will go up against increased competition but TI's wireless revenue from Nokia can still continue to grow as Nokia’s market share is stable to increasing, though the monopoly that TI had on Nokia's business is not there now.As I said, It makes business sense for anybody to have more than one supplier.
This multi vendor strategy in industry has also created a lot of new business opportunities for different players.
For example, TI has been continuously increasing its collaboration with Motorola and Ericsson, building on its already strong position in wireless business.I see the engagement with Ericsson as more strategic and important, as they are into the business of supplying platforms for wireless products covering a broad spectra of cellphone companies.

Samsung also has extended its agreement with Texas Instruments to use the company's OMAP platforms and Bluetooth technologies in its upcoming handsets. Earlier Samsung's BlackJack & SGH-i620 had made use of TI's OMAP processor.

TI grabbed one more opportunity when Motorola announced its plans to remove Qualcomm from its 3G roadmap in favor of Texas Instruments, come mid-2008. According to a report from American Technology Research, Motorola has already begun to move resources away from Qualcomm 3G technologies into 3G efforts from TI.According to sources, Motorola felt that Qualcomm was getting increasingly difficult to business with.Though it was not made clear whether it was because of financial issues or technical ones.
Also in Japan, TI's business with SEMC, Sharp, Fujitsu and NEC has been gaining good momentum.

And what effect all this will have on Qualcomm? It has been the biggest licenser of handset technology. Till now, only Nokia, Sony-Ericsson and Qualcomm had the talent to make the chipsets for the so-called third generation phones, Nokia’s decision to license its wireless technology broadly will arm lots of new players with the talent to get into this biz. Now that this critical technology will be available to license, the technical hurdles to make 3G chipsets have suddenly become much smaller.This will potentially mount the competition against Qualcomm.
Qualcomm is also facing some big legal battles with Broadcomm. And it was on the losing end when the Bush administration declined to veto a ruling by the International Trade Commission that favors Broadcom in a major patent dispute with Qualcomm.
In another interesting develoment, Infineon has bought LSI Corp's wireless products business for $450 million in cash, plus a performance-based payment of up to $50 million (If the group meets certain targets).About 700 LSI employess will be moving to infineon as a part of this deal.(As a rule of thumb a share of around 10% in wireless chips market is considered good to have healthy profits).Needless to say Infineon needs the scale to compete in the very dynamic & increasingly competitive wireless markets and LSI is looking to focus more on its storage nad networking business.All this looks like some kind of consolidation in the industry.It made sense for Nokia ,too, to loosen the vertical integration ,it has long practiced in the industry.As motorola did 2 years before and Apple is successfully doing by sourcing the various parts from different parties.
As a dessert to the main course, let me serve some rumours that are doing rounds in industry circles, mentioning some Taiwanese company(MediaTech) in talks with Analog Devices regarding the wireless business, looking for some kind of acquisition.But,as I said, these are rumours,as of now, so avoid over-relishing & overeating.
With all this, it is anybody's guess how the market would have responded to all these changes? Even president Bush could have guessed. :-P