China is a huge market for wireless data and telephony. At the end of this past October, the three major telecom operators—China Mobile, China, Unicom, and China Telecom—had a combined total of nearly 813 million mostly 2.5 G mobile phone subscribers, according to Marbridge Consulting. However, the Beijing-based market research firm noted that China Mobile had 16.58 million TD-SCDMA (Time Division Synchronous Code Division Multiple Access—China’s version of CDMA technology) subscribers; China Unicom had 11.66 million WCDMA (Wideband Code Division Multiple Access) subscribers; and China Telecom had 2.53 million CDMA subscribers. And these 3G numbers are growing, pointing to a huge market for chip suppliers providing baseband and application processor chip solutions to handset vendors targeting the China market.
In this emerging competitive landscape, Qualcomm Inc. is the company to catch. In July this year, market research firm iSuppli ranked it first among the top nine digital baseband chip suppliers worldwide. Qualcomm’s newest Snapdragon chipset shows up in the Google Nexus One smartphone; Lenovo IdeaPad U1 Hybrid and Skylight smart book device, Sony-Ericsson's Xperia X10, the HTC HD2 and LG eXpo, among others. Qualcomm faces tough competition in WCDMA, from Infineon, Texas Instruments, Broadcom and Mediatek—it’s biggest threat in China. iSuppli of El Segundo, California says Hsinchu City, Taiwan-based Mediatek holds 71 percent of China’s 2G-handset chip market and it plans to maintain its share in the 3G realm. In July this year, Mediatek acquired a license from Tokyo-based DoCoMo for DoCoMo's LTE-PF, a mobile-terminal platform based on Long Term Evolution. Mediatek aims to integrate the LTE technology into its 2G and 3G solutions.
In the iSuppli ranking of the top nine digital baseband chip suppliers, behind leader Qualcomm and second place Mediatek were in order Texas Instruments, ST Ericsson, Infineon, Broadcom, Renesas, Marvell, and Spreadtrum. Absent from the list, but determined not to be left out of this market opportunity, is Intel Corp. On August 30th this year, the Santa Clara, California-based microprocessor chip giant, purchased Infineon Technologies’ wireless chip business for $1.4 Billion. With the acquisition, Intel gets access to Infineon’s software-defined-radio technology, which supports multiple standards on the same processor with only a software change.
For the China market, these chip vendors have to be targeting the TD SCDMA standard, which the Chinese government is pushing as the major next-generation 3G standard. And to serve this market, chip vendors must have offerings that cost no more than $10. According to a report in Digitimes last October, China Mobile is expecting TD-SCDMA handsets and smartphones to retail for about $75 (500 yuan) and $150 (1,000) yuan, respectively, this quarter. The Digitimes article stated that China Mobile is setting up its fourth-phase TD-SCDMA network of more than 100,000 base stations and expects the number of TD-SCDMA subscribers to increase from 13.42 million currently to 100 million in 2012.
The question that begs to be answered is can any of the U.S. and European chip vendors in iSuppli’s top nine ranking compete in this price sensitive market against Shanghai-based Spreadtrum Communications, Inc. or Taiwan-based Mediatek?
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