4. Assessing The Value Chain Top 5 =84% share. After LG, only RIM & HTC make money. Jury out on Sagem, Japanese OEMs and Taiwanese ODMs surviving. See BenQ! EBITDA (cash) margins are far higher (25%-50%+). Operators are cash machines Non-SMS data revs rarely over 7% of sales, but rising. Need at least $2.5bn of sales to cover min. R&D requirements. Only 3 chipmakers shipped over 100m units in ’06. M&A has begun. Semis EBIT % 30% c. 20% LOSS LOSS OEMs 16% LOSS 11% 10% 6% EBIT % Operators EBIT % 18% 12% 26% 9% 12%
5. 3G Semis: Sink or Swim Site Map Contact Us QUALCOMM Worldwide Site Map Contact Us QUALCOMM Worldwide After 15 GSM chipmakers, only 4-5 with proven 3G platforms. The door is closing on 2G platforms Software Stack Apps. Processor Multi-Mode CMOS RF Interop/ Approvals Power Management OEMs looking for complete offerings. This Places huge R&D burden on chipmakers to provide platforms and solutions Problem in 3G is device complexity vs. cost. $500m R&D is not enough! Only Nokia, SE and Motorola outspends Qualcomm and TI in handset R&D. Software Apps Suites Radio Peripherals Chip Integration 65nm and 45nm IPR
6. Supply Chain: Devils in the Detail Handset OEMs have the most complex supply chains and the highest volumes of any end-market 100bn components per year 100 different platforms 2-3 week firm order backlog Negative net working capital 6,000 product variants 6m handsets shipped per week Operator customisations Product cycles 6-12 months Inventory channel checks High delivery accuracy High in-house yields, low FFR OEMs that could not manage this complexity shifted the problem via outsourcing. Has it worked? Motorola just put supply-chain head in charge of devices. They have new platform strategy, but will struggle until 2H08 at earliest Outside of Nokia no one makes money in the low-end
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8. 3G For All? What is trying to be achieved with 3G4All? Will it really kick-start data adoption? What new services requires 3G and not simply EDGE? ULCH 2G initiatives boosted mobile phone penetration in low-income markets by driving down prices. Other than Qcom, who else makes money from this? Is there evidence 3G is bringing in incremental sales? Let’s see initiatives to drive data usage that work; making e-mail ubiquitous on all phones would be a good start. MUCH MORE NEEDS TO BE DONE! Huawei & ZTE look to be replacing Sharp, Option, at Vodafone. Do they make money? WCDMA Share 4Q06 Japan!