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Samsung taps Infineon as second source for UMTS chipsets

Cuts reliance on Qualcomm

Freescale

Another mobile chipmaker now controlled by private equity, Freescale Semiconductor, has rolled out the first in a planned series of applications processors targeted at specific market segments. The Freescale i.MX37 focuses on video and imaging and targets high end media players and navigation devices. Over the next six months, the company expects to follow up the launch with at least two more processors. All three make heavy use of products acquired with Sigmatel in February.

Following the merger, the existing Freescale i.MX product team moved into Sigmatel's offices and the combined group is now creating a unified roadmap to support Freescale’s strategy - as its position in the mainstream handset chip market declines with the loss of business from its former owner and main customer Motorola – of moving into high value but specialized niches, especially in multimedia and home content. Sigmatel's products cover entry level, audio-only and QVGA video chips, with low cost, while Freescale's i.MX family is aimed at higher end capabilities, with programmable cores.

The Samsung-Infineon deal

Now Samsung is doing its bit, buoyed by its rising market share but also driven by an increasing need to improve cost efficiency in the face of Nokia’s increasing prowess in this area. It has been looking for an alternative UMTS partner for some time, but until recently the choices have been scant, with TI too closely associated with Nokia (as well as Motorola and Ericsson Mobile Platforms), and STMicro also heavily focused on its development partnership with Nokia. “Until now, there’s been no credible second source for UMTS chips,” said analyst Will Strauss of Forward Concepts. Infineon is the second largest owner of UMTS intellectual property after Qualcomm, and its developments have been geared to the open market and to cost efficiency, unlike TI’s and STMicro’s, which are heavily customized for Nokia.

According to Strauss, Qualcomm has charged Samsung five per cent of the OEM value of handsets containing its baseband chips, which eats into profits. "Infineon's chipsets are more than 20 per cent cheaper than Qualcomm's, but their quality does not lag behind Qualcomm's at all," a senior Samsung official told Korean Daily News. Samsung’s first Infineon-based handset started shipping in Europe earlier this month.

Samsung urgently needs to reduce costs in order to build on the market share it has gained from the collapse of Motorola, and especially as, with LG, it is facing a re-entry of Nokia into the Korean market. There are widespread reports that Nokia will soon cut prices on certain 3G handsets and re-enter the Korean market, rumors that sent LG shares tumbling by over eight per cent and Samsung’s by four per cent.

Nokia would only say: "We are interested in the Korean market and investigating it, but we have not unveiled any products for that market." LG’s head of marketing strategy, Chang Ma, told the Reuters news agency: "We are carefully watching Nokia." LG has been a major beneficiary of Nokia’s falling market share in north America and has been increasingly focused on high end mediaphones.

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