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Qualcomm Eyes Expansion with India LTE Bid

By atesmeh | May 25, 2010

Qualcomm is an enabler – a technology enabler, that is. The company has used its considerable financial resources to accelerate the development and deployment of technologies ranging from its core CDMA business to its mobile television subsidiary FLO TV. 

Yesterday, Qualcomm put this strategy into play in India, the world’s second-largest CDMA market. The majority of Qualcomm’s sales are generated by silicon chips and technology licensing agreements based on CDMA technology, where it has significant intellectual property holdings.

The company is participating in India’s 4G BWA (Broadband Wireless Access) spectrum auction, which started this week. If it wins the auction, Qualcomm wants to build out a TD-LTE network in the unpaired spectrum band. TD-LTE is compatible with 3G WCDMA/HSPA and EV-DO.

It might seem a little odd for a chipmaker to want to get into the network infrastructure space, but it’s not out of character for Qualcomm. The company’s $18.2 billion cash stash can be leveraged to invest in areas that will accelerate business for Qualcomm’s cash cow – its chip making business. The majority of Qualcomm’s sales are generated by silicon chips and technology licensing agreements based on CDMA technology, in which it has significant intellectual property.

Qualcomm declined to be interviewed for this story because of the sensitivity around the BWA auction, but In-Stat analyst Allen Nogee says the company’s move to get into the Indian TD-LTE market is a natural choice because CDMA technology will eventually stop being a growth generator for Qualcomm. 

“The problem for Qualcomm is that CDMA is nearing the end of its evolutionary path,” Nogee says. “They’ve really been pushing into LTE because they need that to keep growing their company…. It’s not going to happen for a really long time, especially in places like India, but if you look at the horizon in a lot of developed areas there isn’t a whole lot more coming. There are going to be phones for years and year to come, but it’s not a growing area.”

TD-LTE could be a lucrative area for Qualcomm when combined with legacy CDMA technology – hence the bid to participate in the India spectrum auction. “They want to be prepared and have TD-LTE/CDMA phones,” says Nogee. “There’s going to be a lot of countries that will be using TD-LTE.”

Qualcomm also wants to prevent WiMAX from being deployed in India’s 2.3 GHz band, says ABI Research analyst Phil Solis. “Qualcomm wants to promote TD-LTE over WiMAX in India and they’re willing to put up big money for the auction,” Solis says. “It’s a huge market and opens up the door to a lot more potential sales for its chips.”

Qualcomm has been instrumental in getting Indian operators to deploy CDMA by backing low-cost CDMA phones and the Open Market Handsets initiative, which aims to increase distribution of CDMA-based devices. 

India had 100 million CDMA subscribers in March of last year thanks in part to Qualcomm’s efforts, according to the CDMA Development Group. India’s total mobile subscriber base is more than 580 million and the country is still working to deploy third generation wireless services on its recently-auctioned 3G spectrum licenses.

Qualcomm is taking a similarly proactive approach in China, which is using TD-SCDMA for 3G and TD-LTE for 4G. Qualcomm recently opened its second research and development center in China to help expand its presence in what it called an “increasingly important” wireless market. 

China’s wireless market dwarfs that of the U.S. The country’s top operator, China Mobile, has 544.2 million subscribers. The country’s second-largest operator, China Unicom, has 544 million subscribers. By comparison, Verizon and AT&T have wireless subscriber bases of 92 million and 86 million, respectively. 

Qualcomm has the money and motivation to break into important markets like China and India. These emerging markets could be a major growth engine for the adoption of CDMA technology, which will in turn benefit Qualcomm. 

China and India present major growth opportunities for all kinds of wireless companies. What separates Qualcomm’s strategy from other players in the wireless industry is how proactive it is, says Forrester Research analyst Michele Pelino.

“Qualcomm hasn’t been able to capture as much of the Indian market as they want,” she says. “They’re looking at how they can make it happen sooner, faster, quicker. They’re pushing it forward instead of waiting for the market to be there.” 

 

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