Nokia backs away from CDMA

For its part, Sanyo said the would-be venture partners had found it hard to make concessions in sharing patent rights and other company assets. The Nokia plan was a cornerstone of Sanyo's planned restructuring efforts, as it faces deepening losses and hefty cutbacks.

Certainly the usually invincible Nokia has consistently stumbled in CDMA handsets, partly because of its refusal to buy Qualcomm chips. Instead, it relied first on its own silicon, and then on that of TI and STMicro, but the companies have been unable to achieve the volume and price efficiencies of Qualcomm itself, nor can they control the R&D agenda – Nokia and TI focused their R&D heavily on the planned EV-DV iteration that was to follow the current EV-DO Rev A, only to have this canned by Qualcomm in favour of further revisions of EV-DO, which would better suit the needs of key operators such as Sprint.

Assuming Nokia moves out of CDMA, that will spell the end of TI's activities in this arena, another casualty among many littered along the CDMA road.

But aggressive defense of its market position is hardly a crime, especially as Qualcomm is now facing unprecedented challenges, of which the heightened and concerted hostility of its competitors is just one. Growth remains buoyant in the CDMA market this year, driven by the major upgrades by Verizon, Sprint and others, but there is certainly a question mark over how far the platform will gain new market share, and the legal and regulatory challenges from Nokia, Broadcom and others will not improve operator confidence in Qualcomm platforms.

The defection of Australia's Telstra rocked confidence in CDMA2000 as a long term 3Gplus infrastructure, and the forthcoming decision by Sprint Nextel over what technologies to use in its 2.5GHz spectrum will be critical – a strategy based on expanded CDMA2000 plus Qualcomm's Flash-OFDM would make a lot of technical sense and would restore faith in the Qualcomm roadmap, while a choice of WiMAX or TD-CDMA would have the reverse effect.

Qualcomm’s reaction

Qualcomm, as we have tracked in recent months, is making robust efforts to open up its options, even should CDMA's market share start to fall off rapidly among new deployments. Of course, it now has an important royalty revenue stream from the W-CDMA 3G standard – the heart of the battles with Nokia, Ericsson, Broadcom et al – and is starting to generate business for its own W-CDMA chips.

Just as importantly, it is working hard to support multiple platforms within highly integrated architectures, recognising that post-3G will be a complex patchwork of technologies in which the simple dominance of the past will rarely be an option. So we see Wi-Fi, OFDM, assorted broadcasting standards and other radios incorporated into the Qualcomm family.

This reflects rising doubt over the future of CDMA as a separate platform, with many carriers considering other options for their next generation networks, and eyeing the bellwether Sprint Nextel decision closely.

In a note to investors, CIBC World Markets analyst Ittai Kidron speculated that two specific CDMA operators are behind the Nokia decision to break with Sanyo. Reliance in India and Vivo in Brazil are both considering switching away from CDMA to GSM/W-CDMA.

Both these providers are in high growth markets that are among Nokia's most important targets for the near future. In particular, it has invested huge efforts in gaining Indian brand presence and building manufacturing capacity, and would have hoped this would create a ready market for the Sanyo joint products – a picture that will look far less rosy should Reliance defect.

If CDMA will inevitably decline as a standalone platform, Nokia is seeking to derive some consolation for its own failure in this sector, by using admission of that failure as a nail to drive into the CDMA coffin.

"We couldn't make it in this market because the market is dying, and that's partly because Qualcomm has made it commercially non-viable" – is the subtext behind the blandly worded phrases of the official statements.