InterDigital Inc (IDCC)

[Dave Davis]

Samsung to produce Qualcomm phone chips [The San Diego Union-Tribune]

Nov. 24--Qualcomm and Samsung, two giants in the wireless industry, are expanding their
relationship with a deal in which the South Korean company will make cell phone chips under the
Qualcomm brand. The companies did not disclose the value of the deal or the number of chips to be manufactured.
Samsung, which makes both chips and cell phones, is one of Qualcomm's largest customers.

San Diego-based Qualcomm is a developer of wireless technology and a designer of semiconductors for cell phones. It contracts with other companies to produce chips under Qualcomm's name.
The deal between Qualcomm and Samsung is key to both companies.
It allows Samsung to diversify by contracting out its chip-making services.

For Qualcomm, the agreement will help the company meet rising demand for chips in cell phones. Analyst Michael Cohen of Pacific American Securities said the agreement may be a sign that
Qualcomm is gearing up to sell more chips as the next generation of cellular networks are built.
Qualcomm's wireless technology, called code-division multiple access, or CDMA, is used by about
one in five cell phones throughout the world.
Eventually, virtually all cell phones will use Qualcomm's technology, either in the form of CDMA
or what is known as wideband CDMA. Qualcomm sells chips that run cell phones and collects royalties
on the sale of phones using its technology.
"Our foundry agreement with Samsung will provide an additional source of supply and assist us in
our strategy aimed to ensure capacity to support existing and anticipated business growth in both
CDMA and WCDMA markets," Sanjay K. Jha, president of Qualcomm's chip division, said in a statement.
Oh-Hyun Kwon, president of Samsung's logic technologies business, called the agreement "the next
logical step in a long-standing relationship."
The Samsung deal "is more confirmation that the global ramp to wideband CDMA is truly
happening," said Cohen, the analyst. "Only when the rest of the cellular networks go to wideband
CDMA do they have to pay royalties to Qualcomm. That's the other 80 percent of the market."
Samsung has threatened over the years to begin manufacturing its own cell phone chips, Cohen
said. Analysts said the agreement between the two companies lessens that threat.
"I think strengthening the partnership lessens the potential for competitive tension," Cohen
said.
The Samsung deal, announced late Tuesday, comes at a time when Qualcomm is under fire for its
licensing agreements.
Last month, six major wireless companies complained to the European Commission about what they
described as Qualcomm's "anti-competitive conduct."
Broadcom Corp., Ericsson, NEC, Nokia, Panasonic Mobile Communications and Texas Instruments
filed complaints that accused Qualcomm of overcharging for its technology and stifling competitors.
Qualcomm has said the allegations are "factually inaccurate and legally meritless."
Analyst Albert Lin of American Technology Research said the Samsung deal provides Qualcomm with
an ally.
"With six large companies pressuring the European Commission to investigate claims of unfair
business practices, Qualcomm can count on the support of Samsung," Lin said in a research note.
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