Now that the Chinese government has sanctioned its homegrown TD-SCDMA technology as the preferred third-generation technology of the land, and with precious 3G licenses about to be granted to Chinese operators, Qualcomm Inc.’s claims on TD-SCDMA products bear more weight.
The CDMA developer said it signed a W-CDMA and TD-SCDMA modem card and router license agreement with 4G Systems GmbH, a German wireless developer and supplier. Qualcomm said that under the royalty-bearing agreement, it granted 4G a license to develop, manufacture and sell W-CDMA and TD-SCDMA modem card and router products.
Regarding royalties, Qualcomm stated that 4G would pay Qualcomm’s standard rates, which the company says “are the same irrespective of the CDMA standard implemented by the modem card or router products.”
“Qualcomm supports all 3G standards, including TD-SCDMA, which also is based on CDMA technology,” Qualcomm wrote in response to questions from RCR Wireless News. “As a senior member of the TD-SCDMA Forum, we continue to pay close attention to its development in China. We cannot speculate on potential rollouts or timing. We believe that we have essential intellectual property that applies and we already have approximately 60 license agreements outside of China that include TD-SCDMA (including Siemens).”
Although many in the industry consider TD-SCDMA’s development by Chinese technologists an attempt to use the basis of Qualcomm’s proprietary CDMA technology without paying royalties, it appears Qualcomm plans to charge royalties on TD-SCDMA.
Qualcomm is likely making it known that it’s charging for use of TD-SCDMA in an attempt to set a precedent, to get people used to the idea that they consider the technology primarily theirs, commented Philip Solis, senior analyst of Mobile Wireless at ABI Research.
The real East-meets-West challenge is expected when and if Chinese vendors like Huawei Technology Co. Ltd. or ZTE Corp. refuse to negotiate license agreements for TD-SCDMA, hence royalty payments, with Qualcomm.
“Qualcomm’s been famous for making enemies by charging its standard royalty rates across CDMA standards; there’s no reason to expect that this would be any different for TD-SCDMA,” commented Peter Jarich, principal analyst of wireless infrastructure at Current Analysis Inc. “To the contrary, the potential opportunity makes it very important. China alone is a huge market and if TD-SCDMA can get its act together, you could see lots of users. Beyond China, most people have written off the technology, but you know that China will do its best to drive TD-SCDMA into new markets and new opportunities such as the developing world.”
For sure, the market potential for TD-SCDMA is huge. In China there are currently more than 400 million wireless subscribers, and China’s market is expected to grow 65 percent by the end of 2010, according to Informa Telecoms & Media.
ABI said it expects an independent TD-SCDMA network to be built in China, but said that the current GSM network would be maintained to ensure national coverage.
In addition to the Qualcomm royalty factor, TD-SCDMA has other hurdles as well, even in China.
“It is just a first step for TD-SCDMA even in China, the technology’s `hometown’,” commented Junmei He, a Hong Kong-based analyst at ABI.
“Due to the high population of PHS service users among low-end subscribers and the decreasing price of both GSM terminals and service prices, it will be challenging for TD-SCDMA to attract voice service subscribers. At the same time, it appears unlikely that TD-SCDMA can achieve quick success by offering high-speed data services, because demand for such services will remain low in the short term. Also, strong competition from W-CDMA and CDMA2000, with their well-established subscriber bases, could curtail adoption. As a result, TD-SCDMA operators-potentially including China Telecom and China Netcom-need to adopt a more flexible business model to compete with existing mobile operators.”
In early February, China Mobile Chief Executive Officer Wang Xiaochu told UBS Investment Bank that his company is unlikely to pick TD-SCDMA as a standalone technology for 3G. UBS noted that China Mobile, with its GSM infrastructure, was likely to opt for an easy 3G upgrade by choosing W-CDMA technology.
New mobile operators China Telecom Corp. and China Netcom are likelier candidates for China’s TD-SCDMA technology.
“In support of the national standard, the Chinese government will give strong policy support to help TD-SCDMA operators gain time and establish a price lead over other 3G technologies, but the stakes could not be higher,” added Jake Saunders, director of global forecasting at ABI. “It is not inconceivable that we see a billion SIM card subscriptions in the market by 2015. Multiply that by a forecasted [average revenue per user] of about $300 per annum, and you can understand the interest not just from domestic but also international players. Vodafone [Group plc], Telefonica [S.A.], Hutchison, Deutsche Telekom [AG] and Telstra, all have equity or strategic relationships in China.”
ABI concluded that GSM will continue to dominate the Chinese mobile landscape over the next five to eight years, but CDMA2000 1x EV-DO could be squeezed out by W-CDMA and TD-SCDMA.
But before any of these predictions can be proved right or wrong, operators need 3G licenses, and those could be delayed past the second quarter. L.M. Ericsson’s head of operations in Hong Kong, Johan Adler, told Reuters last Thursday that TD-SCDMA field tests may hold up the issuance of 3G licenses. The Chinese government likely wants to time its license-granting to TD-SCDMA’s readiness to ensure its market viability.
Hong Kong’s government-backed Wireless Technology Industry Association says a small TD-SCDMA trial network is being set up and is scheduled to last two to three years. The project is funded by the Hong Kong government, private firms and Datang Mobile Communications Equipment Co., one of TD-SCDMA’s founding developers in China.
Wonder how Qualcomm likes them apples.
