Qualcomm Inc (QCOM)

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TechSpin: Motorola Markets to Poor

Cell phones divide to conquer Third World; NCR rattled by CEO’s move to HP; Open source thinks globally, and woos Australia.
April 4, 2005

http://www.redherring.com/Article.aspx?a=11673&hed=TechSpin%3A+Motorola+Markets+to+Poor§...

Motorola breaks “poor” price barrier

The big challenge for the world’s cell phone manufacturers is how to make phones that the world’s poor can afford. As the U.S. and European markets for cell phones become increasingly saturated, cell phone makers are starting to service the other 5 billion people on the planet, most of whom cannot afford cell phones with cameras and digital music players. With landlines either non-existent, poorly maintained, or under the governance of corrupt monopolies, the Third World can benefit from the emergence of a simple, inexpensive device. The most costly element in cell phones is the radio chip, which supports either GSM or CDMA. GSM chips cost around $12; CDMA chips are about $20. The effort to drive down costs, then, favors GSM. That means that GSM-focused chip makers such as Texas Instruments and Freescale Semiconductor are ahead of the game. On the flip side, it means that CDMA chip king Qualcomm will have a much harder time satisfying the global majority. But Qualcomm is not conceding the fight. “CDMA can't compete on the price, but it can on features offered to operators and customers,” Bill Davidson, vice president of investor relations for Qualcomm, told Investor’s Business Daily. “GSM’s only growth is to offer low-end voice service,” he said. According to IBD, to get costs down, 10 operators from Africa, the Middle East, and Central and Southeast Asia issued a bid to cell phone makers to come up with a low-cost phone. Motorola won with a sub-$40 phone. Freescale is Motorola’s biggest phone chip supplier. The phone Motorola is designing has immense potential. The company is in line to sell 6 million immediately to carriers in poor countries, with the additional potential to reach 100 million per year in shipments. Nokia is also in the game. In January, the company said it plans to start selling a low-cost GSM phone using a Texas Instruments chip.And not to be outdone, Qualcomm, in February, said it has designed low-cost chips for CDMA phones for Latin America, India, and China.