The key question in mobile phone communication Technologies is – Qualcomm, with its patent portfolio, maintained its dominant position in CDMA/WCDMA (3G) technologies. Will it maintain its lead in 4G-LTE Technology too?. Let’s get a perspective by reviewing the landscape.
Qualcomm develops and patents mobile phone communication technologies, such as CDMA/WCDMA (3G technology) and OFDMA (LTE/WiMax technologies), which it then licenses to tablet and mobile phone manufacturers. These mobile phone manufacturers make phones that utilize Qualcomm’s technologies and operate on networks based on these technologies. Qualcomm charges royalties on each handset sold based on its technology in addition to one-time licensing fees from handset vendors. Apple, Samsung, Nokia and LG are some of its key customers.
With well over 250 licensees, Qualcomm’s CDMA patent portfolio is the most widely and extensively licensed portfolio in the 3G space today. In past, Qualcomm has been in a tiff with entities like Nokia and India’s Reliance over high royalty rates that it charged. However, over time, the average royalty rate that Qualcomm charges mobile handset vendors has declined considerably, as the average selling price of CDMA mobile phones continue to decline and with carriers transitioning to high-speed 4G networks. And the bad news is that Qualcomm does not have a strong position in this segment.
Due to the lack of same dominant IP portfolio in 4G technologies like LTE, Qualcomm might not be able to achieve the same royalty revenues on OFDMA-based LTE technology, as it enjoyed in CDMA-based technologies. As the industry continues to transition from the 3G to 4G technology, Qualcomm’s average royalty rate is coming under pressure, impacting the bottom-line.
It is anticipated that the gradual shift from 2G to 3G/4G will increase the global penetration of mobile devices from the current 50% to 65% in 2016. And, couple of years thereafter, with adoption of 3G/4G technologies increasing to as much as 80% will constrict CDMA technologies market further.