Qualcomm Inc (QCOM)

[Golfinvestor]

Qualcomm sees strong 3G growth amid semicon slowdown
Tue Nov 16, 2004 12:35 AM ET
By Doug Young
HONG KONG, Nov 16 (Reuters) - Wireless technology company Qualcomm Inc. (QCOM.O: Quote, Profile, Research) said on Tuesday it believes a slowdown in the mobile handset sector is limited to older technology models, as it copes with an unexpected surge in demand for its chips.

The cellphone chip maker expects to have its own shortage ironed out by the end of next year's first quarter, with the rollout of new third-generation (3G) mobile systems worldwide expected to fuel demand, said Qualcomm Chief Executive Officer Irwin Jacobs.

The advent of 3G, with its high speed data transmission capabilities, is expected to usher in a new generation of data intensive services like videoconferencing and music downloads.

"The 2G handset sales are slowing down as people begin to focus on 3G," Jacobs told a media briefing on the sidelines of the 3G World Congress in Hong Kong.

His comments came amid growing concern about a downturn in the broader semiconductor industry, with some PC and cellphone component makers recently warning of slowing business as their customers clear out excess inventory.

In September, Texas Instruments (TXN.N: Quote, Profile, Research) , the world's largest maker of chips for cellphones, had to trim its third-quarter revenue outlook as customers worked off their unsold inventory.

But Qualcomm, which gets a large portion of its chip revenue from 3G handsets, has faced the opposite problem, amid strong demand for 3G services in Japan and Korea and a recent service launch in the United States by Verizon Wireless, a joint venture between Verizon Communications (VZ.N: Quote, Profile, Research) and Vodafone (VOD.L: Quote, Profile, Research) .

"This past year we got surprised by the growth," Jacobs said. "We've had a very good year because of the new technology coming in."

Qualcomm forecasts that 3G handset sales will grow about 31 percent to between 218 million and 228 million units next year.

Within that total, handsets based on the more mature CDMA 2000 standard, one of two major standards in use and one that Qualcomm dominates, should grow about 14 percent to about 168 million units.

But demand is expected to more than double to 55 million for handsets based on the world's other major standard, WCDMA, as a series of new services come on stream, most notably a newly launch service from European leader Vodafone.

Jacobs declined to give Qualcomm's market share for WCDMA chips, but acknowledged the number is small. But his company hopes to some day control up to 50 percent of the market as smaller players get out and Qualcomm gains momentum, he said.

"Our goal is 50 percent of WCDMA. It'll be several years out" to achieving that target, he said. "Often people laugh at that when we say that's our target."

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