3G Will Boom … Eventually


Is 3G here or not? From the conflicting reports about the uptake of 3G services, that is a megabillion dollar question. Whenever faced with such a quandary, I normally turn to the basics – silicon. The chips always tell the story, albeit nine to 12 months before rest of the world catches up. And from what the forecasts show, it towards end of 2005 we could expect some serious uptake in 3G. Makes sense, given that its the holiday season, and the carriers will have enough services to entice customers with.

According to market research firm Forward Concepts’ new 560-page study, “Global Cellular Handset & Chip Markets,” the 2005 cell phone unit sales will increase only by 4.5% to the 746-million level as larger markets for older technologies decline. Older TDMA shipments are projected to fall by 30% and even traditional GSM shipments will decline by a projected 23% this year. However, the shipments of phones that support EDGE and higher speeds will boom. EDGE phone sales are going to be up 51% to the 60-million; WCDMA cell phones will grow by 165% to the 45-million level and CDMA2000 1xEV-DO terminals (cards and handsets) will grow by 65% to 16-million units.

According to the report, Texas Instruments is the number-one cellular chip provider, overall, and also the number-one provider of baseband chips for both 2G and 3G/UMTS cellular and application processor market. Still that is not something the Dallas giant can rest its laurels on, because Qualcomm is right on its heels. Carter L. Horney analyst with Forward Concepts says that, “TI can’t be complacent though, since Qualcomm still dominates the CDMA market and has a large number of design-ins for its UMTS baseband chips.”

First Global, an investment research firm predicts that Qualcomm might have over come its challenges and could in for smooth sailing, thanks to 3G. They believe that the stock has tanked nearly 27% from its 52 week high and “there is a visible disconnect between its valuations and fundamentals.” Further they say that the growth drivers remain strong for WCDMA/CDMA market, albeit with a little hiccup in very near-term. In other words, TI be warned.

I had said as much in my story, Qualcomm: the next monopoly. So what does it all mean for 3G? Its going to boom eventually… perhaps in 2006

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