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Wednesday, June 22, 2005
Samsung to Cut Reliance on Qualcomm Chipsets for 3G Phones

Samsung is stepping up efforts to reduce reliance on Qualcomm Inc. by developing mobile phone chipsets for third-generation (3G) services that use European technology.

If the development of the W-CDMA chipsets is successful, Samsung is expected to become significantly less dependent on chipsets made by Qualcomm of the United States, some analysts here said.

Samsung is developing a so-called dual-band, dual-mode W-CDMA chipset for use in South Korea.

The dual-band, dual-mode chipset means it can work in both the CDMA2000 1X network developed by Qualcomm and the W-CDMA network, a successor of Europe's global system for mobile communications technology.

The introduction of the dual-band, dual-mode chipset is considered a crucial factor in South Korea since the government is requiring European 3G service operators -- SK Telecom Co. and KTF Co. -- to provide handsets equipped with the chipset.

In South Korea, Qualcomm's CDMA2000 1X technology, dubbed one of the 2.5-generation mobile phone standards, has long been a dominant technology for mobile phones with faster Internet capability.

Although SK Telecom and KTF launched commercial European 3G services in late 2003, the new technology has so far been a failure, mainly due to a lack of available handsets and limited network coverage.

Operators have accused handset makers of delaying the introduction of dual-band, dual-mode W-CDMA handsets, while handset makers have criticized Qualcomm for postponing the production of necessary chipsets.

Still, it remains unclear when Qualcomm will introduce its dual-band and dual-mode W-CDMA chipset, the MSM7600.

Qualcomm owns key patents on code division multiple access (CDMA) technology, one of two major wireless standards, and South Korean handset makers were the first in the world to commercialize it.

Qualcomm has benefited from the rising sales of CDMA handsets in worldwide markets.

Under an agreement, Qualcomm collects 5.25 percent of local sales of handsets in royalties and 5.75 percent of exports from South Korean manufacturers.

South Korean handset makers such as Samsung and LG Electronics Inc., which enjoy robust sales of CDMA handsets, are key contributors to Qualcomm's earnings.

However, Qualcomm has drawn criticism from Korean clients, as it offered a more favorable royalty rate to Chinese manufacturers.

Samsung's move to develop its own 3G chipsets is also aimed at taking a leadership role in the so-called fourth-generation (4G) mobile network era, some analysts here say.

On March 13, Lee Ki-tae, head of Samsung's mobile phone business division, told Yonhap News that the company was preparing for the local standardization of the 4G mobile network.

"I expect the 4G service to start around 2012," Lee said on the sidelines of the world's largest high-tech trade fair, Cebit, in Hanover, Germany.

Worldwide demand for W-CDMA handsets is forecast to total about 50 million units this year, according to Lee.

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