Qualcomm Inc (QCOM)

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GfK: Handset Sales Up
10.18.05

http://www.unstrung.com/document.asp?doc_id=82542&WT.svl=wire1_11

LONDON -- In Q3 each of the last three years, the European cell phone market was ignited by colour, camera, and 3G. But not this year. Q305’s hottest GSM phone is a re-heated block phone from SonyEricsson, the K750i, and the top WCMDA phone is Nokia’s relatively ancient Q1 launch, the 6680. Still, at 10% sequential unit growth, Europe outpaced other big geographies in the quarter, and this global re-balancing generates a positive ASP vector for the industry.

Q3’s only significant technical development is the dominance of 90 nanometre circuitry in WCDMA baseband chipsets, which lengthens battery life by 40%. Tom Dailey, Managing Director of GfK Equity Research noted, “A phone with a dead battery is just no good to a network operator, and Nokia’s six-month jump on Qualcomm’s MSM 6250 chipset paid off: while Qualcomm doubled its WCDMA baseband share to 14%, the Nokia/Texas Instruments team still leads by a wide margin. In Q4 the 95 gram Samsung Z500 (with Qualcomm chipset) is the first 3G phone to feel like a 2G phone – it’s a proven form factor and is 50% lighter than leading 3G phones, so we think it will ramp nicely through year-end.”


European Market Not Without its Highlights…

The quarter’s other winners include SonyEricsson, who gained over 200 basis points of European GSM share and then late in the quarter launched two segment-killers: The W800 music phone, and its first 3G offering with the new Ericsson Mobile Platforms chipset, the K600 series. Elsewhere in GSM, Nokia gained 200 basis points of share in the Middle East.

WCDMA Lagged But the Structure Improved

Lacklustre WCDMA sales increased 11% sequentially, but GfK was encouraged by what was being sold, and by who was selling it. Dailey continued, “Some pivotal 2G operators have warmed to 3G, and at the same time, we’ve seen less price-driven selling. It means that after 30 months of 3G in Europe, the phones are finally good enough to pull demand.”

China GSM Still White Hot

The decline of CDMA and PHS in China continues to feed GSM sales, which are growing at nearly 30% year-over-year. The biggest beneficiary of the trend is Nokia, who has a tiny position in the former two but has surged in GSM. Lu Wang, GfK China analyst observed, “Nokia’s renewed distribution strategy has revived their fortunes, and they have been on a share-gaining streak all year.” Low-end phones did particularly well, which is terrific news for Texas Instruments, who gained significant share by via chipsets in both Nokia and Motorola’s key low-end phones.

GfK AG