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Deconstructing the Nokia multisourcing chipset strategy

Posted: 28 Oct 2008 ?? ?Print Version ?Bookmark and Share

Keywords:multisourcing strategy chipset? ASIC? GPRS? 3G?

So...how is Nokia's new "multisourcing, commercial chipset strategy" working out for the industry and for Nokia's handset business? And for IC suppliers, how does their working experience with Nokia differ from that with Samsung?

Mobile industry observers say that the two companies' approaches present a night-and-day contrast.

For example, scoring a "design win" with Samsung is pretty easy, because Samsung welcomes you with open arms and, before you know it, your engineers are integrated into one of their teams.

On the other hand..."Don't get too excited. A design-win with Samsung doesn't mean anything," warned Chris Fisher, CEO of The Ether Group, a Silicon Valley-based consulting firm.

Why?

Because Samsung prides itself on having multiple design teams working in parallel, pitting one against the other in a race to solve the same problem. Hence, the chance that your chip actually ends up in a handset on a commercial shelf can be as low as one in four.

Of 70 to 90 handset projects under way in parallel at Samsung at any given time, only 25 percent will reach the commercial market, according to some accounts.

Meanwhile, there's a better chance that, in the competition, Samsung has seriously drained your engineering resources.

This isn't the case with Nokia, said Kai Oistamo, Nokia's executive vice president responsible for devices.

In an interview with EE Times, Oistamo said that Nokia designs about 50 different handset models a year.

Once you are in with one of Nokia's design projects, you are in. Then, "it's up to you" to keep that status, said Oistamo.

Unless something goes horribly wrong, you'll see your chip inside Nokia's commercial handset model.

Two sides
Just a little bit of background here.

Nokia gave up its internal custom-chip development program more than a year ago. As a result, the Finnish company last year parted ways with its long-time ASIC partners!Texas Instruments and STMicroelectronics. Nokia, meanwhile, sold its ASIC team!some 200 designers!to ST.

Oistamo acknowledged that this drastic change stirred lots of "emotional" responses from the industry. But he added, "We believe that it was absolutely the right thing to do."

Despite its new "multisourcing" strategy, Nokia is known as a company "really tough to get into." Oistamo agreed. "We are 'open,' but we look to work with the best."

Drawing a sharp contrast to Samsung's approach, Oistamo said, "This is not about 'shopping.'" He added, "This is not about flying from flower to flower."

According to Oistamo, for Nokia's 2009 design cycles, all the chipsets have been chosen. As for the 2010 road map, "We are just about to get done," he said. Nokia has already selected the chip vendors it plans to work with.

While Oistamo did not disclose the list of 2010 chip suppliers, last year, Nokia disclosed that it chose Infineon, Broadcom, and ST as second sources for Nokia's GPRS, EDGE, and 3G handsets, respectively.

"Infineon and Broadcom were chosen after exhaustive research indicated they had the best products available in these categories. Both will gain revenue from Nokia in 2008," wrote Linley Gwennap in The Linley Group's news letter earlier this year.

Linley added, "ST was chosen because, well, it isn't Qualcomm. ST, in fact, has no 3G technology of its own and was willing to adopt a Nokia design team that will design a processor using Nokia technology and sell it back to Nokia. If all goes well, this new device could generate revenue in 2010."

Asian OEM factor
For Nokia, big changes are happening not just with chip suppliers.

Oistamo noted that their recent decision to offer S60 and Symbian operating system free to the open source community is even more significant!"an order of magnitude bigger"!than the move into commercial chipsets.

The thread tying both moves is Nokia's well-calculated decision to make its business "more open" and to "bring in more external value," according to Oistatmo.

Also factored into Nokia's calculations is a growing number of OEMs in China and Asia, he acknowledged.

When more and more players in Asia start looking at royalty-free smartphone platforms like Google's Android or Linux, it's only a matter of time before both Microsoft's proprietary Windows Mobile and Symbian (which requires a license until it becomes open in the first half of 2009) face a significant disadvantage. In the long run, the greatest danger, in terms of global support for handsets and software developers, would be obsolescence.

Oistamo said, "Changes are happening at all the handset vendors."

Nokia's new "open" strategy is not to rest on its laurels (Nokia holds the biggest share in the global smart phone market), but to make other handset vendors in the industry and software developers "see a potential opportunity presented by S60 and Symbian OS," once they become available for free, he added.

- Junko Yoshida
EE Times





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