Business Data Communication

How does Qualcomm hold an important position in the Telecom value chain?

Answer : Qualcomm is a wireless technology leader and one of the most valuable semiconductor company
in the world, known for its CDMA technology. It earns most of its revenues by selling chipsets and licensing
patents to both handset manufacturers and infrastructure companies while its services business and strategic
initiatives are minor contributors.
Traditional Telecom Value-chain
Typically, a Telecom value chain consists of end-user , handset manufacturers, chipset manufacturers,
Infrastructure providers, network operators and application developers. Qualcomm's core competency was in
technology development and chipset/software design and was a major player in the chipset manufacturing
part along with Texas Instruments. Qualcomm was an integrated systems provider, which enabled handset
manufacturers to focus on other differentiating features. Qualcomm hold an important position in Telcom
ecosystem because of its core CDMA intellectual property (IP).
2G Technologies and Qualcomm chipsets
The transition from slower analog cellular systems to 2G technologies started in 1980s and eventually, two
standards were widely adopted GSM/TDMA and CDMA. Europe, U.S and Japan adopted GSM, but CDMA
had better technical advantages like capacity utilisation and voice quality. So, new companies and countries
like Hongkong adopted CDMA in their new handsets.
Eventually, the explosive growth in wireless communications accentuated the technical weakness of TDMA
Qualcomm patented all its CDMA technology and charged upfront licensing fees plus royalty fees of
average 4-5% on the wholesale price of CDMA-based equipment. Thereby, making money in every single
handset. They also made chipset for infrastructure providers to provide CDMA transmission becoming an
integral part of the value chain during 2G.
3G Technologies and Qualcomm chipsets
Increased usage of internet on mobile phones led to the requirement of a new 3G technology with companies
utilising existing CDMA technology as their base. Eventually, three technologies emerged prominently
1. WCDMA
- compatible with older GSM using a wider spectrum than existing CDMA
technologies
2. CDMA 2000
- Qualcomm's bet for CDMA technologies
3. TD-SCMA
- developed in China, relied on CDMA and wasn't commercialised sooner
Both CDMA2000 and WCDMA incorporated Qualcomm's core patented technologies as basic
underpinning. 143 operators adopted CDMA2000 across 67 countries in 2005. Licenses as of July 2009 in
3G CDMA space are 175. As all these 3G technologies are using CDMA as an underlying technology, they
are paying royalty fees to Qualcomm. Basically, every 3G handset has a chip either designed by Qualcomm
or developed using Qualcomm's core patents, making it an integral part of the Telcom value chain.
4G Technologies and Qualcomm chipsets
4G was designed to offer data rates at high speed than existing technology. Qualcomm started its research
with UMB technology but abandoned it fearing less adoption and started contributing to OFDMA standards
which lead to the development of LTE. Qualcomm acquired Flarion to broaden its OFDMA portfolio. 4G is
expected to emerge slowly compared to 3G and is expected to be widespread in urban areas. So multimode
3G/4G sets are needed and Qualcomm will continue to receive royalties until such handouts exist and when
only 4G handsets are introduced, Qualcomm has pursued additional licensing agreements. Qualcomm also
started entering new licensing for single-mode OFDM by signing agreements with Nokia and many other
small players
Other Contributions in Telecom Value-chain
Qualcomm initially made its own end to end Telecom flow but divested its network
infrastructure business to Erickson and handset business to Kyocera. It's

Submitted By: Eshaan Kulshreshtha PGP ID:PGP37234 Section:B Subject:BDC

QMT tried to venture
into the phone display business. Qualcomm's "
Snapdragon"
included ARM-based
microprocessor, for a full range of wireless connectivity and mobile computing. Qualcomm also
formed
Qualcomm Ventures
to invest in small scale businesses and eventually boost the
telecom ecosystem.

Submitted By: Eshaan Kulshreshtha PGP ID:PGP37234 Section:B Subject:BDC