Replies to post #17371 on Qualcomm Inc (QCOM)

[Data_Rox]

Dang - somebody is starting to get it!

[Jim Mullens]

kqc, Re: “India Royalty Issue Haunts GSM Players”

Yup, it’s about time we saw that from the “media”, suggesting that Qualcomm’s India visit / webcast got someone’s attention in the press. It’s a start, but what I find striking in all of this is the fact that the average cost of GSM phones (with inferior technology) is 50% higher than CDMA phones ($113 vs $75, +$38). And, the dominant GSM handset supplier in India (read Nokia) has the lowest cost structure of any company and yet achieves the greatest premium pricing (**profits**). Further, for June ’06, GSM handset sales amounted to $554M vs $135M for CDMA.

Given the above, and considering that-

+ Qualcomm profits are derived from only chipset sales and a low single digit percentage of the handset ASP, whereas-

+ Nokia’s profits are derived from total handset sales (GSM total of $554M).

Wonder which company is “ripping off” India?

The above was discussed in Qualcomm’s recent webcast, and wonder why those facts were not mentioned in the article you posted?

FWIW, repost of mine from SI>>>>>>>>>>>>>>>>>>


John, Re: “Indian CDMA operators have suggested Qualcomm bring down the chipset cost at par with GSM chipset cost.”

Perhaps Indian “concerns” are misdirected? One would think, if the “real” Indian concern was over handset cost, the focus should be directed toward Nokia and GSM, and not Qualcomm and CDMA.

+ GSM dominates the Indian market with 70% of the subscribers

+ GSM ASPs are $38/ (50%) higher than CDMA ASPs for the average phone sold in India

+ One company dominates Indian GSM sales (~80% share /and the world for that matter), and that company has the lowest cost structure of any handset company and yet achieves the greatest premium pricing (**profits**)

+ GSM phones / networks are inferior technology wise to CDMA (spectral efficiency/ data capabilities).

If the “real” concern is about handset cost, the recent Qualcomm meetings / webcast should have answered those issues for the Indian press / industry / government officials.

It will be interesting to see the response by the Indian press / government, but again I imagine the Nokia advertising (and other?) dollar rules.

  
 . 
 India <$50 Market- Mar ’06 -Yankee Group Data 
 . 
  
 		Handset ASP		Device Vol 
 GSM		$38			0.850M 
 CDMA		$43			1.450 
 . 
 India total handset market (June ’06) 
 . 
 		Handset ASP	Device Vol  Sales Dollars 
 GSM		~$113	        4.9M		$554M 
 CDMA		~$ 75		1.8		$135M 
 Total				6.7M 
 . 
 Chipset analysis (from Singh article) 
 .   
 		Unit Cost  %Handset Cost	Handset Cost 
 			   Sales Price?	  Sales Price? 
  
 GSM		$05.00	   17%			$29.41 
 CDMA		$10.00	   25%			$40.00 
 

Other Data Points (QCOM 6/21/06 Webcast)
.
1) 2/3 of all CDMA handsets sold in India are priced below $50

2) 98% of all CDMA handsets sold in India are priced below $75

3) <bthe average selling price (ASP) for GSM phones sold in India far exceeds the ASP of CDMA phones, with the differential is about $38.

4) The dominant GSM handset supplier in India has the lowest cost structure of any company and yet achieves the greatest premium pricing (**profits**)

Snip - Singh article >>>>

Currently, the chipset cost ranges from $5 for a GSM handset and $10 for a CDMA handset. For GSM phones, chipsets account for 17% of handset costs against 25% for CDMA phones. At present, costs of GSM handsets are anywhere upward of $30.

Snip- Slacker article >>>

CDMA operators look like they have had their best month in a very long time. They added 1.8 million subscribers during the month which takes their share of net adds up to 36% for the month.