ABI Research Sees IC Cost, not Royalties, Driving Price Differential Between Low Cost CDMA and GSM Handsets.

LONDON -- Qualcomm has recently borne the brunt of considerable openly hostile pressure from carriers - most notably from Reliance in India - to reduce its royalty fees. Carriers point out that higher royalties for CDMA chipsets mean they cannot meet the same price points as their GSM competitors, and the need to subsidize handset prices is seriously impacting their margins. However, a new study by ABI Research indicates that royalties are not at the root of the cost differential between CDMA and GSM handsets.

Principal analyst Stuart Carlaw says, "The issue of royalties is just a convenient lever that carriers are using to put competitive pressure on the CDMA silicon market." ABI Research found that royalty costs for CDMA shipments into India were in the region of 5% of the total handset sale value. This is in line with Qualcomm's policy of normalizing royalty fees at the 5% mark on a global scale. The sole exception is the Chinese internal market where a 2-3% royalty fee is applied.

Carlaw goes on to add that, "Comparing low cost CDMA2000 and 2G GSM devices is a bit like comparing apples to pears. The question is whether there is a direct need for this degree of functionality at the silicon level in emerging markets, especially given the comparably higher IC costs."

Qualcomm does enjoy a very robust dominance of the CDMA silicon markets and it could be argued that such market dominance does not allow for normal competitive pressures to occur. However the pressure from carriers is having its effect: Qualcomm has announced the development of its QSC1100 low cost chipset that aims to redress some of the IC cost issues fuelling this confrontation.

ABI Research's "Low Cost CDMA Handsets: Chips not Royalties Driving Cost Differential with GSM"

(http://www.abiresearch.com/products/research_brief/Mobile_ Devices_Market_Update/101) (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.) clearly outlines the major factors contributing to CDMA terminals' higher cost. It also profiles the market for low-cost CDMA terminals. The Research Brief forms part of the company's Mobile Devices Research Service

(http://www.abiresearch.com/products/service/Mobile_ Devices_Research_Service), (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.) which includes Research Reports, other Research Briefs, Market Data, Online Databases, ABI Insights and analyst inquiry support.

Founded in 1990 and headquartered in New York, ABI Research maintains global operations supporting annual research programs, intelligence services, and market reports in broadband and multimedia, RFID and M2M, wireless connectivity, mobile wireless, transportation, and emerging technologies. For information, visit www.abiresearch.com, or call +1.516.624.2500.