Nokia and Qualcomm drop chip bombshell

by Caroline Gabriel, ReThink Wireless

It’s finally happened – what the mobile world has been waiting for, and in some cases dreading, since Nokia and Qualcomm settled their patent licensing differences last summer and called a truce on years of hostility. The two giants are to work together to develop advanced 3G and 3G+ devices based on the Nokia-led Symbian Series 60 software platform, with the initial offerings, scheduled for mid-2010, targeted at North America. In a separate announcement, Nokia has handed a fat contract to Broadcom for HSDPA chips, slapping the face of existing suppliers.

The deal with Qualcomm will enable Nokia to create a new class of phones, devices which can offer both HSPA and LTE on the same chip, a perfect bridge for upgrading to LTE, and likely to be destined for AT&T’s US network.

This has all the hallmarks of a Nokia response to challenge. With poor performance in North America a constant problem – and Samsung taking advantage more than the Finnish vendor of Motorola’s decline in the US base – Nokia faced the serious possibility of Android becoming the dominant software system in the region. Android is already the biggest threat to Nokia’s dreams of ubiquity for open source Symbian, and that issue is critical to the Finn. While it might happily adopt a cross-OS strategy in its traditional business models, it needs tight integration of the devices, Series 60 and its web services to turn it into the internet player it wants to be.

And the situation was particularly critical in the US, where the Google machine has lit an especially bright fire under Android, and where Nokia sees the migration of Verizon to LTE, and the growth of its direct-to-consumer web proposition, as its main chances to improve its standing. Qualcomm will be a good partner here – not only does it have excellent chips for many HSPA/HSPA+ implementations, but it has famously strong levels of influence at Verizon Wireless, which could help Nokia penetrate that closed customer at the LTE stage. Too many times, Nokia has shot itself in the foot by refusing to work with Qualcomm and so missing out on good chips – witness its repeated attempts to break into the CDMA handset market while bypassing the San Diego firm’s silicon, which were always wrong footed by the chip giant’s iron control of its platform. And with Qualcomm working closely with Android, there was the danger of history repeating itself in the integrated device/web services business – but it hinted at its new priorities when it announced recently that it was joining the Symbian Foundation.

Nokia will spread its favors cautiously and will remain wary of being too dependent on Qualcomm, just as it adopts a more open approach to chip purchasing. It seems likely that the two companies will test their new friendship in north America and it will be 2011 or much later before this spreads to the Nokia heartlands, where its 3G+ alliance with the newly created ST Ericsson should stay in pole position (provided ST executes well). We would also expect to see Nokia and Qualcomm working on some MID devices based on Snapdragon, should the Finnish company become convinced of that product category’s potential for 2010 or beyond. And of course, the pair are likely to collaborate in the area both aims to lead, LTE, especially for Verizon.

But for now, the deal is based on the Qualcomm MSM7000 and MSM8000 chipsets for W-CDMA and the HSPA family, and so will target AT&T and T-Mobile primarily. There is no doubt the balance of power has shifted, likely hastening Texas Instruments’ exit even from the custom baseband business, which is dependent on Nokia. The fact that Broadcom has now been added to the UMTS pile hurts the newly formed ST Ericsson, or at least offers a second source as a counter balance against its dominance.

“Nokia is very pleased to be in discussions with Qualcomm around designing mobile devices that can benefit from the high level of integration found on MSM chipsets,” said Kai Oistamo, executive VP of devices at Nokia. “We are eager to demonstrate to the industry the possibilities that exist when innovative and open software is combined with advanced hardware solutions.”

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