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Shift in China's mobile market threatens U.S. chip companies

Posted: 20 Jan 2015 ?? ?Print Version ?Bookmark and Share

Keywords:mobile market? LTE? China Mobile? base bands? Wi-Fi?

Leaders in the U.S. chip industrysuch as Qualcomm and Broadcommay face trouble with the shifting sands in China's mobile market sooner than expected, sources who attended the International Consumer Electronics Show last week said.

Among big changes in the works are China Mobile's shift in procurement policy from five-mode smartphones to three-mode models, and big plans among Chinese apps processor vendors to embrace connectivity (Wi-Fi and Bluetooth Low Energy).

China Mobile, the world's biggest cellular operator (in terms of subscriber numbers), initially bought only smartphones based on five-mode (supporting TD-LTE, FDD LTE, TD-SCDMA, WCDMA, GSM) and 10-frequency base band modems. The impetus behind this policy was said to help internationalise TD-LTE and promote development of multiple mobile communication technologies.

Last year, however, China Mobile relaxed its procurement rule to include three-mode (TD-LTE, TD-SCDMA, EDGE/GPRS/GSM) models.

As a result, those profiting from China Mobile's new policy are China's leading fabless chip companies such as Spreadtrum and Leadcore, along with China-based smartphones.

China Mobile sees three-mode smartphones helpful to launch more inexpensive TD-LTE smartphones, Chinese industry sources say. The operator hopes to aggressively promote its TD-LTE services, and the way to that goal is lowering required specification from five- to three-mode, they said.

For smartphone vendors making five-mode models, Qualcomm (which dominates the market) and Marvell were the only chip suppliers they could depend on.

In Qualcomm's latest financial call last fall, president Derek Aberle acknowledged that he expects the global 3G/4G average selling prices will decline approximately 9-10 per cent in fiscal 2015. Aberle explained, "Really a big part of the year-over-year decline is driven by growth in China, and in particular three-mode and Chinese OEMs I think gaining share over non-Chinese OEMs."

Qualcomm believes the shift from five-mode to three-mode that began in 2014 will continue in 2015.

The Qualcomm president said, "Throughout the course of 2014, the percentage of three-mode devices on China Mobile's network compared with five-mode has really continued to shift over time to more a three-mode. And we expect that will probably continue at least into 2015 as well." While Qualcomm did not provide specific numbers, some 50 to 60 per cent of smartphones procured by China Mobile in 2014 were three-mode models.

Will Strauss, president of Forward Concepts, told us, "I don't see either MediaTek or Qualcomm losing out on this. Although they both have five-mode capability, either can easily field a 'three-mode' modem in a single quarter." He added, "However, it does make life easier for Leadcore and Spreadtrum, since neither has a five-mode capability."

A three-mode LTE turnkey solution Spreadtrum launched last summer, for example, supports TD-LTE, TD-SCDMA and EDGE/GPRS/GSM for the domestic China market.

Base bands

A variety of base bands used by different cellular operators in China (Source: Forward Concepts; EE Times)

Currently, a set of different base band technologies are supported by different Chinese mobile operators, according to Forward Concepts.

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