Qualcomm 3G Ban May Hit Anadigics And TriQuint
by Michael Hatcher
An impending ban on the US importation of new 3G cell phone handsets based on Qualcomm chipsets could spell bad news for GaAs specialists TriQuint Semiconductor and Anadigics.
That s according to Aaron Husock, an analyst at Morgan Stanley who covers many of the companies involved in the US cellular business.
The ban is set to result from a ruling by the US International Trade Commission (ITC) in response to a complaint against Qualcomm that was filed by its rival Broadcom back in June 2005.
Last week, the ITC issued an exclusion order, barring imports of the infringing chips and chipsets, as well as new models of 3G cell phones that contain them. The original Broadcom patent at the center of the case relates to power conservation in the advanced handsets, although Qualcomm maintains that Broadcom barely uses the technology.
"Having failed to generate interest in its wideband-CDMA products, Broadcom brought this litigation against Qualcomm, but has used it as a vehicle to attack the US cellular industry," said Qualcomm in its response to the ITC ruling.
Qualcomm maintains that the impending ban would serve only to punish innocent wireless operators, cell phone makers, and, in turn, component vendors.
Paul Jacobs, Qualcomm s CEO, said that the company would appeal to the US President to overturn the ruling. "We will ask the White House to veto this decision and avoid turning back the clock on the tremendous gains that have been achieved in mobile broadband communications, disaster preparedness and emergency response."
While the ITC ban will not become effective until 60 days after its issue, a Presidential intervention is extremely rare in such cases. According to reports, the White House has only ever overturned this type of ITC decision on five previous occasions - the most recent being as long ago as 1987.
Analyzing the likely effect of the ITC ruling, Aaron Husock reckons that, if implemented and sustained, the ban would have a three-fold impact on the US handset market. Although the situation is complicated, his view is that the net effect on GaAs chip makers will be beneficial for RF Micro Devices and Skyworks Solutions; but that there will be a "modest" negative impact on Anadigics and TriQuint.
Anadigics has enjoyed a strong relationship with Qualcomm over recent years. In early 2006, its power amplifiers were adopted in a Qualcomm wideband-CDMA reference design.
Qualcomm s chipsets are widely used by LG and Samsung in their US handset portfolios, and the Korean firms currently produce some 80 percent of Cingular's W-CDMA handset line-up, Husock says.
"Cingular will likely shift its W-CDMA portfolio towards Motorola and Nokia, and away from LG and Samsung - if the Qualcomm ban lasts for a meaningful period of time," explained Husock.
At the PA component level, that will likely mean a shift towards Skyworks and RFMD, and away from Anadigics, added the analyst in his research note.
At the US carrier level, Husock expects Verizon and Sprint to lose subscribers to Cingular and T-Mobile if the ITC ban is upheld. That s because Verizon and Sprint would be unable to launch new 3G handsets that use the evolution-data optimized (EV-DO) protocol.
That should again be good news for Motorola and Nokia, and have a small net negative effect on Anadigics and TriQuint.
Qualcomm s hopes of the decision being overturned could be raised by the fact that the ITC s investigators were themselves split on the appropriate course of action. Two dissenting commissioners, including the chairman of the panel, said that the handset ban would "adversely affect the public interest".
For its part, CTIA-The Wireless Association (a global industry group representing the wireless business) urged President Bush to veto the ITC s importation ban.
CTIA said: "The ITC decision unnecessarily decreases competition, and denies millions of consumers access to innovative wireless broadband products. This decision flies in the face of public policy that encourages the availability of broadband services and products, and could have the unintended effect of impairing the wireless industry s efforts to improve communications in areas such as public safety."
"Consumers should not have to pay the price for a legal debate that could be settled by other means."
Michael Hatcher is the editor of Compound Semiconductor magazine and compoundsemiconductor.net.