iPhone and the Future of Qualcomm

Qualcomm (QCOM) has been reaping the benefits of the worldwide mobile industry boom for a while. Qualcomm engages in the design, development, manufacture, and marketing of digital wireless telecommunications products and services based on its Code Division Multiple Access (CDMA) technology, key competitor to GSM, the other standard.

In fact, while most of the world has standardized on GSM, the US market continues to be fragmented, with 2 of its major carriers each on GSM (Cingular AT&T and T-Mobile) and CDMA (Verizon and Sprint Nextel). Meanwhile, all those who use CDMA technology are required to pay royalties to Qualcomm, making the company a great growth story.

This summer, Apple enters the market with its iPhone, carried exclusively by Cingular. Each of Verizon and Cingular AT&T have about 56 Million subscribers in North America, and are two of the largest. This means, that Apple has put a stake in the ground to have gone with GSM. Verizon is testing dual-standard, hedging its bets, and could also standardize on GSM in the next few years.

If the iPhone becomes a grand success, then one of two things would happen:

* All the carriers would have to play ball with Apple, and if Apple so desires, they will all think about lining up behind GSM, and tackle the global interoperability issue once and for all.

* Or, Apple will play nice, and support both standards.

In the former case, the iPhone will gradually push CDMA out, while in the latter case, CDMA can keep going.

Apple has a great knack for aligning the arrowheads of an industry, and since the global interoperability and standardization problem is already bugging the mobile industry, they just may decide to force the issue to resolution.

This would not spell good news for Qualcomm.

[Much of the analysis in this article was already done by Tristan Louis back when the iPhone was still in a speculative phase.]