ANALYSIS: Nokia to stop its chipset development
Nokia has said it will stop developing its own chipsets, instead outsourcing the production of total solution chipsets to a list of preferred providers.The company will keep investing in its modem technology though, which it regards as critical to its ability to differentiate. Companies chosen to provide Nokia with chipset solutions will license Nokia¹s modem technology, but build the rest of the chipset according to their own development paths.
Nokia¹s EVP of Technology Platforms, Nikklas Savander (right) said that the decision would change the industry structure of the chipset market. It would free up a number of players to invest R&D budget in other areas away from communications protocol stacks, he said, and it would also give these vendors the chance to sell complete solutions, based on Nokia modems, to other device OEMs.
The decision would also allow Nokia to refocus its own R&D investment on software and other areas, Savander said, while ³fostering more innovation and competitive pricing in the chipset industry.²
Explaining the decision, Savander said, "The tech landscape is evolving rapidly and the number of tech areas Nokia needs to manage is growing all the time. So we are devoting more time and resources to develop these. At the same time we are aiming to increase the efficiency of our R&D development - rather than spread over multiple areas we want to focus on areas where can get the greatest return on R&D investment. This strategy means increasingly partnering with companies who complement our expertise in given areas.
"The chipset industry is consolidating around a few key players who have the scale to invest in a capital intensive business and lengthy development cycles. We believe our announcement will influence the industry¹s structure. It is important to have no potential bottlenecks, and a range of cost competitive solutions available at any point in time. The Interplay of these factors has lead us to introduce this licensing and outsourcing strategy for chipsets."
In a related move, Nokia is shifting 200 IC developers out of Nokia into ST Microelectronics. STM has also been chosen to supply Nokia with a complete 3G HSPA chipset. The Nokia staff affected are in the UK and Finland, and the deal will be done come time towards the end of this year.
Nokia will continue to work with chip supplier Texas Instrument, which will be used as a 'broad scope' suppliuer across GSM and 3G. Broadcom will supply EDGE chipsets, which are standard, non-customised EDGE chipsets, and STM will provide those 3G chipsets.
Savander said he didn¹t see Nokia working with more than two suppliers in any one 'product programme'. Licensing deals require long term investment and commitment and are not a 'plug and play' thing, he said.
"It is a significant change to our strategy," he said. "We do feel we can still sharpen further by focusing on our modem technoogy and collaborating with the best external partners in the industry. We can retain our competitive edge but at the same time limit Nokia¹s business risk, remove potential bottleneck and allow us to increase our focus on software domain to bring significant differentiation and added value in the future."
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