1) Introduction to the highly systemic wireless industry
2) Challenges that Qualcomm faces
– Within the Cellular industry Qualcomm faces the challenge
of a new standard - WCDMA.
– Within the larger Wireless Industry Qualcomm faces the
challenge of another new standard – WI-FI (802.11)
3) Wireless data opportunities
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Cellular System Components Overview
Air Interface & Frequency
T1, T3 lines
Backend Equipment –
Switching, Billing etc.
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• Analog – Uses the complete frequency for one call.
• Time Division Multiple Access (TDMA) – Divides the frequency into
time slices, e.g. US-TDMA and GSM.
• Analogous to many pairs of people speaking with pauses that are so
small that no one notices the delay.
• Code Division Multiple Access (CDMA) – Call signals are transmitted
simultaneously, but using different orthogonal codes.
• Analogous to many pairs of people speaking simultaneously in
mutually exclusive languages.
Advantages of CDMA
• 10-15 Times the Capacity Improvement
• Lower power usages => longer battery life and less over heating
• Geared for Data
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Cellular Systemic Industry – 2G
(20% of World (70% of World
QCOM – 5% royalties Nokia, Ericsson,
Chips & QCOM – 95%, MOT, Nokia, Ericsson,
Software Stack LSI, Samsung etc. Siemens,etc.
Phone Samsung, LG, Sanyo, Nokia, Ericsson,
Sony-Eric, Motorola. Motorola etc.
LU, NT, Eric etc. Nokia, Ericsson,
Siemens, Alcatel etc.
Service Verizon, Sprint PCS, Nextel, Cingular,
Providers South Korea etc. T-Mobile, Europe etc.
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Cellular Systemic Industry – 2.5/3G
CDMA-2000 WCDMA GSM
(1X- 256Kbits/s 2.4 Mbits/sec (GPRS – 40Kbits/s
EVDO-2.4 Mbits/s) 2005 EDGE-70Kbits/s)
QCOM – 5% royalties Nokia, Eric, Siemens, Nokia, Ericsson,
QCOM- 5% royalties. Siemens etc.
Chips & QCOM – 95%, MOT, TI, Nokia, QCOM, LSI, Nokia, Eric,
Software Stack LSI, Samsung etc. Samsung etc. Siemens etc.
Phone Samsung, LG, Sanyo, Samsung, LG, Nokia, Nokia, Ericsson,
Sony-Eric, Motorola. Sony-Eric, MOT etc. Motorola etc.
LU, NT, Eric etc. LU, NT, Eric, Nokia, Nokia, Eric, Siemens,
Siemens, Alcatel etc. Alcatel, Motorola.
Service Verizon, Sprint PCS, Some parts of Europe Cingular, T-Mobile,
Providers Nextel, South Korea ATT, Europe etc.
China, India, Japan,
South America etc.
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Qualcomm`s current business
QCOM CDMA Market TOTAL market CDMA2000 WCDMA
Revenues (52% of total $1.5B 12.5% $12B
Operating Margin $500MM
(28%) -Qcom - 95% of -Nokia/Ericsson
the market have an
-Scale (partnered advantage
Licensing with IBM)
Revenues (34% of total $1B
Operating Margin $900 MM
-5% royalties – -There are more
guaranteed patent holders.
How will they be
* 2002 Annual Report
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December 8, 2003 9
Pros and Cons supporting WCDMA
WCDMA will be the only technology accepted in Europe (license)
Upside - Royalty revenues from WCDMA up to $10 Billion
Early adoption of WCDMA implies early increases in royalty streams
QCOM less likely to be a major player in the chip market – cannibalize existing
CDMA 2000 chip sales growth
Potential adopters of CDMA2000 will adopt a wait and see approach.
High uncertainty regarding demand (see previous slide)
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Qualcomm Strategy in WCDMA
Qualcomm is assisting in the early development and adoption of WCDMA
This will cost Qualcomm significant dollars in R&D, specifically in optimizing
Partnering with a major chip manufacturer to achieve scale.
Hedging the bets
Qualcomm is also rigorously pushing CDMA2000, and also its solution of
GSM/1x to convert existing non-European GSM providers to CDMA2000
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(3G) WI-FI (802.11/.15)
Frequency Exclusive Shared;
Coverage Excellent Coverage; Growing Coverage;
Mobility No Mobility
Manufacturers Cellular Manufacturers D-Link, Cisco, Intel
Service Providers Cellular Service Providers Airports, McDonalds,
Services Voice, 3G Data Data,
Voice over IP
Costs Service charge to end user Free to end user,
Service provider pays ISP
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Wireless Data User Segment Analysis
Corporate Access Commercial Services Communication
Wireless LAN √ High Medium Low
Mobile Service Providers X
Wireless LAN X Low High Medium
Mobile Service Providers √
Wireless LAN X Medium High Medium
Mobile Service Providers √
Wireless LAN ? Low Medium High
Mobile Service Providers ?
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Qualcomm WI-FI Strategy
Qualcomm may incorporate WI-FI into its chips.
• WI-FI can never directly compete with 3G cellular because
– Low Coverage
– No Mobility
– Less security
• WI-FI can add the following benefits to Qualcomm’s chips
– Cheaper last mile solution for service provider
– Higher data rates without mobility
• Anything that grows the demand for data services is good.
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The Wireless Data Revolution
Wireless Data development phases:
1. Person to Person
2. Person to Machine
3. Machine to Machine
Cellular Data Strengths:
2. DSL like Data rate
Cellular Data Weaknesses:
1. Input/Output Constraints
2. Lack of the “Killer Application”
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The wireless industry is a very systemic industry, composed of various other
systemic chains within chains.
However, it is in everyone’s interest to grow consumer demand for wireless,
specially wireless data, and this is what in the end drives the overall strategy of
all the wireless companies, cellular and non-cellular.
The upcoming wireless data boom shall create great opportunities for the
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