Does Intel Corporation Really Need CDMA Support to Fight Qualcomm Inc. in the United States?

In a piece yesterday, I noted that one of the gating factors to Microsoft going "all in" with Intel (NASDAQ: INTC  ) on Windows Phone was the fact that only Qualcomm's (NASDAQ: QCOM  ) modems currently support CDMA, a popular wireless standard in the United States. With this in mind, it's worth exploring the broader question of whether the lack of CDMA support in Intel's cellular modems will impede Intel's domestic smartphone efforts in the long-run. 

CDMA is popular in the USA, but GSM is worldwide
There are two broad 3G standards, and both are in use in the United States. Code Division Multiple Access (CDMA) is used by Verizon, Sprint, and U.S. Cellular. The other standard, Global System for Mobiles (GSM), is supported by AT&T and T-Mobile in the U.S., and is very popular among carriers worldwide.

Qualcomm's cellular modems will work on both CDMA and GSM networks, while Intel's modems do not have CDMA support. This means that if a network uses CDMA as its 3G standard, phones with Intel modems will simply not work. 

While it is true that the major U.S. carriers have moved to LTE (a newer, better standard), there are still areas where LTE is as of yet unavailable, requiring phones to fall-back to whatever 3G standard that the network supports (also, voice over LTE is not yet broadly supported, so phone calls are done over 3G networks). 

Is Intel locked out of the U.S. until CDMA dies?
Eventually, the 3G standards -- including CDMA -- will be phased out in favor of LTE for voice and data. Once this happens (Verizon thinks it can complete this transition by 2021), lack of CDMA support will no longer impede Intel's efforts to gain share in U.S. based handsets.

Further, Intel's chipsets should work just fine on GSM networks like AT&T and T-Mobile. This means that if Intel and the handset vendors are willing to go the extra mile to develop Intel-powered variants of designs for these networks, Intel could still penetrate U.S. smartphone market even while CDMA lives.

The impact of Samsung/Apple dominance
From a technical perspective, smartphones sold on GSM networks in the United States should be Intel-friendly. But don't ignore the U.S. market share breakdown by handset vendor.

According to comScore, during three month period ending in May, the lion's share of the U.S. market went to Apple (NASDAQ: AAPL  ) , commanding a whopping 41.9% share. Samsung took 27.8%, and then the rest of the players -- LG, Motorola, and HTC -- took between 5 and 7% each.

Standalone modems may be a better avenue for Intel in the U.S.
Intel is unlikely to sell applications processors to Apple, and it's doubtful that it would be able to do so to Samsung. This leaves Intel with a domestic addressable market of somewhere south of 17.9% of smartphones.

There is a chance that -- with a sufficiently competitive technology -- Intel could win the modem slot for iPhone models aimed at AT&T and T-Mobile (and more broadly once 3G is phased out). Keep in mind, though, that Qualcomm is today ahead of Intel on modem technology, though if Intel can move its modems to its leading-edge manufacturing technology, it could gain a power consumption (which means battery life) edge.

Foolish bottom line
Right now, smartphones remain difficult for Intel, although the company's investment level makes it quite clear that it is playing to win. Only time will tell how this all plays out, but the best bet for Intel in the U.S. is to try to sell discrete modems into Apple and highly integrated applications processors into the smaller vendors (Motorola, LG, and HTC), particularly those looking for co-branding opportunities to try to fight the Apple/Samsung juggernauts.

Finally, while success in the U.S. would of course be very welcome and incremental, the real opportunity for Intel in the smartphone market likely lies outside of this nation's borders, where the market conditions are much more favorable to merchant silicon vendors. More on that another time, though.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Read/Post Comments (1) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 25, 2014, at 12:56 PM, stoc005 wrote:

    Yes, Intel must have CDMA technology if they are to be taken seriously and want to play in the handset/tablet sandbox. CDMA in the US will not die anytime soon. Need to get some positive ROI on the CDMA infrastructure that is installed. Developing it in-house is difficult. I've seen another company that begins with an M and ends in an A struggle and ultimately give up. They bought CDMA chipsets from QCOM. Not something Intel wants to do.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3042272, ~/Articles/ArticleHandler.aspx, 10/1/2014 8:41:08 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement