iPhone could benefit from Qualcomm chip ban

By Colleen Taylor, Contributing Editor -- Electronic News, 6/11/2007

Despite Qualcomm Inc.'s claims, analysts have predicted that the International Trade Commission's (ITC's)  decision to ban U.S. imports of some mobile phones that include certain Qualcomm 3G chips will have only a limited impact on the global wireless communications industry in the short term -- and could even be good news for some handset makers, according to a report published today by market research firm iSuppli Corp.

The ITC ruled last week that certain Qualcomm chips that are used in cutting-edge EV-DO and WCDMA mobile phones infringe on a patent held by Broadcom Corp. The move follows an ITC decision that Qualcomm's mobile-phone baseband chips violate a Broadcom patent that relates generally to power management in wireless handsets.

Claiming that the measure "will limit consumer choice and access to mobile broadband services, be harmful to operators, manufacturers and the economy, and pose risks to public safety communications," Qualcomm has vowed to ask the federal circuit court of appeals to stay enforcement of the ITC's latest order and to ask President Bush to veto the ITC's decision.

However, analysts at iSuppli believe that Qualcomm's gloomy prediction of the ban's impact has been overstated. If upheld, the ban will impact an estimated 4.2 million shipments of EV-DO and WCDMA mobile phones in 2007, iSuppli said, noting that that will represent only 4.4 percent of North American mobile-phone shipments in the second half of the year and just 3.2 percent of worldwide 3G mobile-phone shipments during the period.

In fact, the firm said, only 11 mobile-phone models would be impacted by the ban in 2007, representing 0.9 percent of new phone model introductions for the year.

The ban will impact certain mobile-phone OEMs to a greater extent than the industry as a whole, due to their sales of phones with the barred Qualcomm chips into the U.S. market. The OEMs that will be most impacted -- in order of degree -- are number-three mobile-phone maker Samsung Electronics Co. Ltd., fifth-ranked LG Electronics and second-placed Motorola Inc.

Suppliers of other semiconductors used in advanced phones, including makers of radio frequency and power-amplifier chips, could see the impact of the ban. These suppliers include TriQuint Semiconductor Inc., RF Micro Devices Inc. and Anadigics Inc.

Even so, iSuppli said it does not expect that the ban will reduce volume shipments of mobile phones in the overall mobile-phone industry this year.

And one product that could be positively impacted by the ban is Apple Inc.'s iPhone, which will be offered to consumers in the United States on June 29. Some of the advanced mobile phones impacted by the ITC ban were expected to compete directly with iPhone, iSuppli said, which could create challenges for carriers planning to offer these competing phones, while boosting the outlook for AT&T, which will sell the iPhone in the United States.

Overall, although Qualcomm said that its protest to the ban is motivated by wanting to protect the public good, it seems that the ban's only real threat is to companies' bottom lines. "The effect of the ban will not be reduced shipment -- but rather lower average selling prices (ASP), as wireless carriers are forced to push aging models that have lower price points, rather than more expensive latest-model EV-DO and WCDMA mobile phones," Jagdish Rebello, director and principal analyst of consumer electronics/India research/wireless communications for iSuppli, said in a statement.