Qualcomm vs. Ericsson – No sweat.

Ericsson represents very little threat to Qualcomm or MediaTek.

• Ericsson’s handset radio chipset business is emerging from the ashes of two failed joint ventures to challenge Qualcomm and MediaTek yet again.
• The joint venture ST Ericsson has now been dismantled and integrated into Ericsson with Robert Puskaric re-appointed to run the business.
• Puskaric ran Ericsson Mobile Platforms (EMP) from 2006 until 2009 before moving on to run Northern Europe and Central Asia for Ericsson from October 2009 until May 2014.
• During that time (2006-2009), EMP was a force to be reckoned with in terms of chipset radio performance thanks to the radio heritage passed down from the Ericsson basestation business.
• However, I suspect that the opportunity for this business to make a comeback has long since passed.
• In the early days of LTE, there was only one solution in the market and every handset maker was desperate to get its hands on a second supplier in order to drive chip costs down and reduce risks.
• At that time ST-Ericsson was the only company, other than Qualcomm, that had a decent, stable and properly working LTE modem.
• Consequently, ST-Ericsson had every handset maker queuing up to use it as second source for LTE.
• Unfortunately, ST Ericsson was unable to execute when it came to implementing the excellent technology in commercial silicon.
• The delay was so great that customers gave up waiting and single sourced Qualcomm until a viable alternative was available.
• Fast forward to 2014 and there are number of alternatives now available and customers have more to choose from.
• Having been let down so badly by ST Ericsson, it is likely that handset customers still have a sour taste in their mouths and it will take a huge marketing effort to convince them otherwise.
• Every player other than Qualcomm and MediaTek is hurting badly at the moment as the market concentrates to fewer players and more companies turn to in-sourcing options.
• Hence, Ericsson is unlikely to be able to make a dent given limited resources (see below) and its awful track record in the handset industry.
• Furthermore, its thin modem the M7450 sampled last year putting it behind the latest offerings from Qualcomm.
• Finally a price of $17 for a LTE thin modem chipset is not actually that cheap and I suspect that Qualcomm will be able to match this price without making a dent in its current margin expectations.
• Hence, I suspect the end result will be a failure to gain any meaningful market share followed by the business being quietly sold off or shut down.
• This will not make a dent in Ericsson’s financial performance as I suspect that the company is putting very little additional resources behind this venture given its very high probability of failure.
• To me, this is Ericsson seeing if it can earn something off the resources that it has already invested rather than a bold new start.
• Qualcomm can remain safely focused on the two biggest threats to its business: MediaTek and the in-sourcing trend by some of the larger handset makers.