Qualcomm Inc (QCOM)

[khemara_qc]

Low Cost is More Than Just Skin Deep for Motorola's Q

http://www.cellular-news.com/story/18399.php

Available for as little as $200, the Motorola Q has set a new low point for smart-phone pricing. And with a materials and manufacturing cost of only $158, the Q has achieved impressively low production expenses as well, according to research from iSuppli Corp.'s Teardown Analysis Service.

iSuppli's dissection of the Q reveals that the new smart phone's material cost, i.e. the total value of all its components, amounts to $150. When manufacturing expenses are added in, each Q costs $158 for Motorola to make, excluding outlays beyond the production of the Q itself, including shipping, logistics, marketing and other channel expenditures.

The Q's low production cost is reflected in its aggressive pricing. Verizon Wireless, the exclusive seller of the Motorola Q, is offering the product for $199 with a two-year contract. With a one-year contract, the Q's price rises to $349.

The smart phone's combination of low pricing and inexpensive design will be key assets for Motorola as it vies for market share against established rivals, iSuppli believes.

"Given the Q's price point, and Motorola's overall market leverage, this phone likely will succeed in reducing the pricing for smart phones overall?boosting acceptance among users who might flinch at the higher-than-$200 price point established by previous Personal Digital Assistant (PDA)/smart-phone products." said Andrew Rassweiler, teardown services manager and senior analyst for iSuppli.

Great Expectations for the Q

Motorola has major expectations for the Q, the latest in the company's string of stylish phones, including the ultra-thin RAZR and SLVR. These phones, particularly the RAZR, have achieved massive sales volumes and have generated major notoriety for Motorola, helping it to solidify its position as the world's number-two mobile-phone maker.

The Q follows in the footsteps of the previous phones, with Motorola calling it the world's lightest and thinnest phone that has a QWERTY keyboard.

The Motorola Q is dual-band CDMA, 1 x Evolution-Data Optimized (EVDO), Bluetooth-capable smart phone. The phone features dual stereo speakers, a 1.3-Megapixel digital camera with flash, a broad 2.4-inch TFT display and a 35-key QWERTY keyboard in a thin 0.45-inch body. On the software side, the Q comes pre-installed with Microsoft Corp.'s Windows Mobile 5.0 operating system, Pocket Internet Explorer and Windows Media Player.

Inside the Q

In terms of component selection, the Motorola Q is quite similar to other smart phones that previously were taken apart by iSuppli's Teardown Analysis service. The Q's applications processor is an Intel Corp. XScale, the same as in the Blackberry 8700c iSuppli analyzed recently.

In terms of component selection, the Motorola Q is quite similar to other smart phones that previously were taken apart by iSuppli's Teardown Analysis service. The Q's applications processor is an Intel Corp. XScale, the same as in the Blackberry 8700c iSuppli analyzed recently.

Looking at the voice communications portion of the phone, the design revolves around a Qualcomm Inc. MSM6500 digital baseband chipset and a Texas Instruments Inc. PTWL93017xxxx analog baseband chipset. Qualcomm's MSM6500 is relatively new, but iSuppli has seen the TI chipset before in Motorola's V635 phone.

The Q's memory subsystem consists of two Multichip Modules (MCPs): one from Intel that has a 256Mbit NOR-type flash memory and a 64Mbit Pseudo SRAM (PSRAM), and the other from M Systems Flash Disk Pioneers Ltd. that has a 128Mbyte Flash DiskOnChip, plus a 64Mbit 1.8-Volt Synchronous DRAM (SDRAM).

Summary of Major Components in the Motorola Q

"center>Component
Supplier
Part Number

Microprocessor
Intel
PXA270C5C312

Digital Baseband Processor
Qualcomm
MSM6500

Analog Baseband
Texas Instruments
PTWL93017CZPHR

Power Management
Qualcomm
PM6650

Memory (NOR Flash + PSRAM)
Intel
RD38F4050L0YBQ0

Memory (Flash DiskOnChip + SDRAM)
M-Systems
S15-D10SD9-C1-P

RF Receiver
Qualcomm
RFR6000

RF Transmitter
Qualcomm
RFT6100

Low Noise Amplifier
Qualcomm
RFL6000

Power Amplifier
Skyworks
CX77112

Power Amplifier
Skyworks
CX77140

Bluetooth Baseband
Broadcom
BCM2035KWB

USB Transceiver/Battery Charger
Freescale
MC13883

CMOS Camera Sensor
Micron
MT9M111


Source: iSuppli Corp. July 2006

Cost Drivers

iSuppli's teardown indicates that the display module is the most expensive component in the Q, at $25. The two memory MCPs are the next most expensive portion of the Q, at $22. The Intel XScale microprocessor is priced at $19, while the Qualcomm digital baseband comes in at $14 and the camera module at $7.

This group of components together costs $87, representing 58 percent of the total material cost of the Q.

Main Cost Drivers in the Motorola Q Smart Phone (Cost in U.S. Dollars)

"center>Component/Subsystem
Cost

Display Module (TFT-LCD)
$25

Memory (Intel and M Systems MCPs)
$22

Applications Processor (Intel XScale)
$19

Digital Baseband (Qualcomm MSM6500)
$14

Camera Module
$7


Subtotal of Main Cost Drivers
$87


Total Materials Costs
$150


Total Materials and Manufacturing Costs
$158


Source: iSuppli Corp. July 2006

Motorola's predicts that Q shipments in 2006 alone will amount to more that 5 million units, with 3 million shipped in the fourth quarter. Whether Motorola can meet such an aggressive sales target is uncertain, since it is entering a market of limited size and with established competitors. However, it does indicate that the company has great expectations for its little smart phone.