In-stat in-sights; CDMA could overtake GSM cellular

Electronic News, Nov 11, 1996 by Ray Jodoin

In-Stat Senior Analyst While the U.S. electronics industry in general, and the semiconductor industry in particular, are captivated by the European

GSM cellular standard, the CDMA air interface, developed by San Diego-based Qualcomm, could rapidly approach the GSM standard's volumes. Currently, CDMA has a 55 percent share of the digital cellular market in the U.S., and a 48 percent share in the A- and B-band PCS market. If we add the C-band's big winner, NextWave, the technology has to be considered dominant.

Service providers like the potential for increased subscriber count promised by CDMA. That, however, is not enough to make the new technology a winner. What does make it a winner is the fact that every major telephony hardware provider, with one exception, has paid multiple millions of dollars to license it. The fact that the lone exception has voiced every imaginable roadblock has not stopped the industry from placing more than $6 billion in infrastructure and handset orders during the past 18 months. If we now consider the "unpublished" Korean awards to Samsung and LG, the true number is approximately $10 billion.

If the market is so big, and capable of growing so fast, why is there still only one supplier providing ASICs? The latest estimate indicates that approximately 18 million GSM handsets will be sold in 1997. While this is certainly a huge number, CDMA could reach more than 7 million in 1997, its first full calendar year on the market.

If the potential for wireless local loop is also considered, CDMA could be approaching GSM volumes in 1998.

On the handset side of the equation, Qualcomm Personal Electronics, Qualcomm and Sony joint venture, is clearly the current leader.

Samsung, LG and OKI are ramping up quickly, as is Motorola.

Now for the real question. Why is there only one current supplier of ASICs? While there are many possible reasons, In-Stat believes that many of the major U.S. semiconductor manufacturers have failed to grasp the full size of the market, relative to GSM. Considering handset projections, the 1997 market could exceed $500 million.

Adding the ASICs required for the infrastructure will put the figure at more than $750 million, total. Not a huge market, but certainly large enough to support a few players. A few new players will also help to stabilize the market. After all, we know how companies react to sole-source situations.

Just who are the potential players? We have to look no farther than the membership roster of the CDMA Development Group. The leading initial contenders appear to be LG, Motorola and Samsung. These could quickly be followed by Siemens and VLSI Technology. In-Stat doubts, however, that anyone will have silicon available until mid-1997, at the earliest. In the interim, Qualcomm will continue to build their ASIC business and when the $1 billion critical-mass point is reached, could have an insurmountable lead.