CDMA handsets costs are generally higher than GSM handsets. But with the strategic concession of Qualcomm and China Telecom’s channel policy, the burst of CDMA is soon coming to public horizon.
 Since spring festival, more and more players in mobile phone industry come to Teleepoch for CDMA business opportunities, among which some are Copycat Cell Phone solution providers. Their demand is easy and direct, that is to layout a CDMA PCBA as per the most hot sale GSM handsets in the market. As the leading CDMA terminal solution provider, it is the first time for Teleepoch CEO Doctor Chuan to see this.
During China Telecom 3rd phase CDMA bid, 59 mobile phone manufacturers submit 215 models. While when China Unicom dominated the CDMA era, the bid models were even less than 100. The 50 million CDMA terminal purchase plan of China Telecom poses tremendous opportunities for CDMA market. Compared with the downtrend of GSM world, CDMA no doubt is becoming a new light spot for mobile phone manufacturer.
However compared with GSM network, Qualcomm still is an inevitable entry barrier.
Concession of Qualcomm 　
The PCBA shipment of the 1st quarter in Teleepoch is more than 1 million, which is nearly the total shipment of the 2008 annual year. Due to the production capacity limit, Doctor Chuan has to give up some orders. Since 2008, Teleepoch becomes the first module licensee of Qualcomm of the CDMA designing house, which directly attract lots of mobile phone manufacturers come to cooperate with Teleepoch. The release of the module license is one significant concession of Qualcomm in the CDMA patent filed, but Doctor Chuan attribute Qualcomm concession to MTK impact on the China market.
Just a few years ago, in the CDMA business chain, it is very hard to see any designing house. The main reason falls into two category, one is the limited CDMA market potential and the high R&D barrier, the other is Qualcomm patent frame do not support the model popular in GSM world, that is designing house offer PCBA, solution provider offer full handsets.
According to Qualcomm previous patent frame, the patent royalty for PCBA is many times of the full handsets. But through many times negotiation, Qualcomm finally agree charge PCBA the same royalty with full handsets, which makes designing house like Teleepoch able to copy the GSM industry chain in the CDMA field.
Qualcomm monopolize 97% of the CDMA patent in the world. If any company decide to research and develop, produce and sale CDMA handsets, Qualcomm will charge in four fields. Firstly, manufacturers need to pay 5 million USD entry fee to acquire the Qualcomm license; once Manufacturers decide to invest on CDMA R&D, they have to purchase the R&D platform from Qualcomm; then they need to purchase the CDMA chipset from Qualcomm; in the end, even in the full handsets Qualcomm will ask for commissions. Although VIA also supplies CDMA chipset, but Qualcomm has absolute advantage in the middle and high end chipset segments. The extremely high patent royalty becomes the main barriers for terminal manufacturers come into CDMA market, which makes Qualcomm a target of public attack in the CDMA industry chain.
But in GSM market, a lot of players like TI, MTK, TI, MTK, and Infineon could supply GSM chipset.?? There is no such patent barrier. With MTK Turkey-solution and flexible distribution channels, GSM has born cost advantage and make GSM a competitive market. As a result, a large number of designing houses and solution providers entry into the GSM market. Even in Shenzhen, there are hundreds of designing houses using MTK platform. Only in 2008, there are more than 2000 GSM models launched in the market. But the CDMA market is shrinking year by year. When China Telecom takes charge of the CDMA network, there are only 28.40 million CDMA subscribers. But at the same time the GSM subscribers is up to 575 million. The existence of a large number of GSM designing house makes GSM industry chain division of labor more clear-cut and more professional, which makes GSM more competitive than GSM.
However, In Doctor Chuan’s opinion, the release of Qualcomm license will change the current situation of CDMA industry chain. As the Qualcomm licensee, any solution companies who cooperate with Teleepoch do not need pay royalty to Qualcomm. All the expenses are calculated in the PCBA. Through the cooperation of more and more downstream partners and economies of scale, Teleepoch will be able to split and lower down the unit PCBA royalty costs. Doctor Chuan said that may be that is the way Qualcomm learn from Copycat Cell Phone solution providers. While in Doctor Chuan’s customer base, he does have ?a lot of mobile phone solution providers.
Actually since last year, many designing house like LONGCHEER, SIMCOM, HUAQIN obtain the Qualcomm 2.5G license. The participation of designing house in the CDMA industry chain will make the CDMA handsets cost down. Nowadays, the dual mode (CDMA/GSM) handsets price is around 500 RMB, but just one year ago the price is as high as 2000 RMB. Teleepoch is the first company to launch price low than 1000 RMB dual mode handsets in the market. Most of the dual mode (CDMA/GSM) GSM comes from Teleepoch. However, compared with GSM, CDMA is still at competitive disadvantage and Doctor Chuan place his hope on China Telecom.
　Restructure of Industry Chain?
As the first generation of CDMA handsets engineer in China, Doctor Chuan has abundant knowledge of China CDMA industry. China Unicom CDMA central purchase policy discourage most of China mobile phone manufacturer, a lot of companies finally decide to quit from CDMA R&D field. But as China Telecom takes charge of the CDMA industry, the? public bidding ?policy makes Doctor Chuan more confident about the CDMA industry.
According to the statistics of China Telecom 3rd phase CDMA bid, only 7 models are through central purchasing while the other 208 models are through public bidding, which greatly excite the public passion on the CDMA industry. Just a few days, more than 200 China national, provincials and regional mobile phone distributors including China Telling, PTAC, set up CDMA distribution alliance in Shenzhen. To respond to China Telecom Sales policy, traditional CDMA mobile phone manufacturers like ZTE, Yulong also adjust their distribution channels. As the CDMA leader, China Telecom is competing for the market share through internal integrated marketing and subsidiary to terminal manufacturer. However compared with GSM, CDMA industry competitiveness is reinforced, but still gaps there!
　Main gaps lie in the terminals
The R&D of CDMA is much more complicated than GSM. Generally it will take 9 to 12 months to develop one CDMA handset, but for GSM using MTK platform, it only takes 6 weeks. Compared with? 　 MTK solution, there is a far gap on the software, which requires terminal manufacturer invest heavily on R&D. Further more, other auxiliary development like test, network connect requires quite a lot human resource and time.? Current, only Teleepoch, UniScope ship CDMA handsets, other designing house like LONGCHEER, SIMCOM CDMA handsets still not come to mass production.
Being more pivotal,　there is a complete and high-efficient industry for companies using MTK solutions. As a large number of designing house use MTK solution, more than 95% is common material which dramatically speeds up the delivery process. While the lead time for Qualcomm chipset is 6 to 8 weeks, but MTK chipset lead time is 3 days. Solution provider could provide handset with MTK solutions within 2 weeks, while CDMA takes more time. At every link of the industry chain, CDMA is much more time-consuming than GSM.? Doctor Chuan say that the CDMA differentiation is far from our expectations, due to CDMA is falling behind, to compete for GSM field is our objective.