TI and InterDigital ally against Qualcomm

In connection with GSM Mobile World Congress, TI and InterDigital have made announcements reflecting an alliance between them. The new development is helping InterDigital make its transition from being an IP licensing company (that a few rivals have called a patent troll) to a firm that makes 3G chips to subsume its IP.

Not surprisingly, InterDigital is more enthusiastic about the alliance than TI is. (It’s fun to read these tea leaves — as someone who ran a little company that did joint press releases with big companies — the message is pretty clear). InterDigital issued a press release trumpeting its W-CDMA (i.e. HSPA) modem option and how it works with the the TI OMAP 3 and OMAP 4 processors:

"We are pleased to be the wireless modem supplier for TI's advanced OMAP 3 platform. Our high performance HSPA modem offers instant mobile broadband connectivity, accelerating the development of compelling new applications," stated Mark Lemmo, Executive Vice President, Business Development for InterDigital. "Available as a 3G modem option, InterDigital's SlimChip MID Module has been pre-integrated with the Zoom OMAP34x-II MDP, allowing mobile application developers and OEMs to fully exploit the rich capabilities of this platform."

The press release goes on to quote Bill Crean, Strategic Marketing Manager, as praising “ The flexible architecture of the OMAP 3 platform allows it to easily connect to InterDigital's SlimChip MID Module.”

Meanwhile, the TI press release allows InterDigital space with other vendors who praise themselves and the OMAP 3. The only mention of InterDigital comes from InterDigital itself:

"We are pleased to be a wireless modem supplier for TI's advanced Zoom II mobile development platform. Our high performance HSPA modem offers instant mobile broadband connectivity, accelerating the development of compelling new applications," stated Mark Lemmo, Executive Vice President, Business Development for InterDigital. "Available as a 3G modem option, InterDigital's SlimChip MID Module has been pre-integrated with the OMAP34x-II MDP, allowing mobile application developers to fully exploit the rich capabilities of this platform."

Eleven months ago, blogger Vijay Nagarajan predicted on his own blog (and later on Seeking Alpha) that an alliance with InterDigital would help TI:

TI is the market leader for 3G application processors with its OMAP product-line. But it does not currently have a standard 3G baseband solution. The company’s OMAP roadmap merely has placeholders for future merchant ICs with 3G baseband. Its mammoth market share comes from custom chips it develops for Nokia and Motorola among others. This position is, however, challenged by the multiple sourcing trend that the handset vendors are now adopting. Left behind in the 3G baseband race, not only by Qualcomm but also by Broadcom, Infineon, InterDigital etc, TI is finding itself losing mobile share. The aggressive strategy and the niche product positioning by the competition is not helping its cause either.

So although Qualcomm has a unique combination of technologies, its rivals are able to ally to produce a competing combination. (We call this “open innovation.”) I don’t know how this will impact Qualcomm’s profitability in the long term, but it seems as though the increased competition isn’t going to help.

TI and Qualcomm in rare agreement

As part of its push to take over the mobile phone world, Intel has its sights set firmly on Qualcomm and TI. Despite their fierce rivalry for device market share — and a bitter fight over CDMA and W-CDMA patents — this is one place where (to a limited degree) the enemy of my enemy is my friend.

Bloomberg quotes Intel CEO Paul Otellini as recognizing the growth potential of mobile devices. Intel is trying to create a brand new segment distinct from smartphones — which it calls mobile Internet devices — where it hopes its Taiwanese OEM partners can enter without major competition from Nokia et al.

As Bloomberg reports:

“I'm skeptical -- that business is tough,” said analyst Bill Gorman at Pittsburgh-based PNC Institutional Investments, which owns 10.8 million Intel shares, according to data compiled by Bloomberg. “There is very difficult entrenched competition. Qualcomm continues to push state of the art; TI is going to remain a major player.”

Intel, the Santa Clara, California-based company whose products are the brains in more than 75 percent of the world's PCs, says only devices with chips based on those complex processors can run the Internet properly because the software at the backbone of the Web was written for computers.

Otellini predicts PC makers will buy Intel chips for new handheld computers, a market Texas Instruments and Qualcomm say their handset customers are exploring. Once he's won over mini- computer buyers with the new product, called Atom, Otellini plans to court phone makers as Intel creates less power-hungry models.

Somehow, I don’t quite see it. Even though Nokia and Intel are de facto cooperating on a Linux variant for these mobile internet devices, this is a frontal assault on Nokia’s 40+% market share for mobile phones based on ARM microprocessors.

Also, the claim that web browsers require an x86 processor to surf the web is silly. Communications bandwidth is going to be the limiting factor — unless you’re teaming up with Adobe to populate the mobile Internet with millions of compute-inefficient, Flash-infested web pages.

Next, there is the assumption that TI and Qualcomm will sit still. As the article notes, both are making more powerful cellphone processors — respectively with their OMAP and Snapdragon processor families. I suspect Otellini’s braggadocio will cause them to redouble their efforts.

If you're think you've heard this song before, you have. As the article notes, to enter the mobile phone market last time Intel spent $5 billion from 2000-2006 and only got about 10% of its money back. Thus far, Intel’s efforts to diversify away from the PC have been unsuccessful.

Given these obstacles — including the fierce opposition — I’d bet against Intel reaching $5 billion in mobile phone revenues by 2015. But I wouldn’t bet the house on it, and would only offer about 3:2 odds against Intel.

We’re #1! We’re #1!

Finally some good news for Qualcomm. As Information Week reports:

Its legal troubles notwithstanding, Qualcomm has supplanted Texas Instruments(TXN) as the world’s leading supplier of integrated circuits for mobile devices, according to data from market research firm iSuppli.

This reshuffling marks the end of, or at least a pause in, Texas Instruments' long reign at the top of the mobile semiconductor market. The first quarter of 2007, according to iSuppli senior analyst Francis Sideco, “marks the first time that TI has not occupied the leadership position in this area since iSuppli began tracking handset market share in 2004.”

iSuppli credits Qualcomm’s monopoly on EV-DO chips (where TI is not currently supplying product) as well as its W-CDMA chips. Of course, TI’s CDMA line traces back to its 2000 acquisition of San Diego-based Dot Wireless for nearly $500 million.

So this is certainly good news for TI. At some point I do need to figure out one discrepancy: everyone has been listing TI as tops in the mobile phone IC market. However, ARM-licensed microprocessors are in more than 80% of all mobile phones being sold (one figure has it above 95%), so who could have more market share than that? So yes, TI is a licensee of ARM and today some of its most popular products are the OMAP application processors containing both a C55x DSP and an ARM9 core.

TI’s own claims are:

• today the company has the majority of market share in GSM/GPRS mobile devices.
• Additionally, more than half of 3G WCDMA handsets use TI basebands, and
• even more use OMAP applications processors.

There’s a double counting problem here: obviously one company could have a majority share for the baseband processor and another majority for the application processor (unless it’s a dual-core processor). There’s even a potential triple counting of share between an IP licensee like ARM, a fabless semiconductor company like Qualcomm and a foundry (like IBM or TSMC used by Qualcomm); it’s only double counting (ARM and TI) for TI which makes its own chips.

Graphic: courtesy Fujitsu.

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