Nokia diversifies chip sources, sheds some R&D

Nokia Corp. is accelerating its research-and-development efforts in software to enable mobile Internet services while scaling back on research and development in chip-based radio technology.
In tandem with this strategy, the Finnish company will pursue multiple sources for its chipsets, many bearing its royalty-producing, licensed technology.
This multi-pronged strategy will allow Nokia to forge ahead with the mobile Internet and the development of revenue-generating services for its many network operator partners worldwide, while drawing increased revenue from licensing its software and chip designs to vendors that serve it and the open market.
Controlling costs, obviously, is a major aspect of the strategy and should strengthen Nokia’s established expertise in this critical area.
According to the company, the multi-sourcing and licensing strategies will allow the vendor to draw on a more diverse set of chip suppliers and outsource costly RF-chip innovation. Nokia will continue to develop modem technology for W-CDMA and license it to suppliers.
“We believe that our renewed strategy will allow us to concentrate on developing core chipset technologies, while increasing our R&D efficiencies,” said Niklas Savander, an executive vice president in Nokia technology platforms, in a prepared statement.
The message: Nokia is innovating on core competencies, while controlling R&D costs by letting suppliers shoulder part of the burden. Meanwhile, it will make licensing profits from those chip suppliers.
Today’s announcement named names: Texas Instruments Inc. will maintain its position as a key supplier across all chip protocols, Broadcom Corp. will provide EDGE baseband chipsets (as will TI), Infineon Technologies will supply GSM chips and STMicroelectronics will provide 3G products.
STMicroelectronics will design and manufacture 3G chipsets based on Nokia’s modem technologies, energy management and RF technology and will offer “complete solutions” back to Nokia as well as the open market. Nokia also will transfer about 200 employees from its chip development facilities in Finland and the United Kingdom to STMicroelectronics in the fourth quarter. According to media reports, that’s about half Nokia’s personnel in that area.
This is the first time that Nokia has ventured beyond TI for EDGE chips and Broadcom’s new business with the largest global handset vendor is an affirmation of Broadcom’s technology, according to Yossi Cohen, a senior vice president and general manager of Broadcom’s mobile platforms group.
Nokia handsets sporting Broadcom’s EDGE-based chipsets are expected to reach consumers in late 2008 and material impacts to Broadcom’s revenue are expected in 2009, Cohen said.