Nokia to outsource chip development

So Nokia is also going down the Nike way? It is indeed curious, how fast life is changing and our industrial landscape is getting modified. Companies such as Nike and Nokia, both global brands with product strategies which are rapidly going global rather than regional have clearly shown that it makes more sense for them to concentrate on the customer side of the market and product design rather than the product manufacturer.

In the same fashion, financial insitutions are also outsourcing their research, their processing, their information technology, and so on and so forth. What will be left will be a very high value add, very thin layer of client interaction managers responsible for client relationship management and revenue generation. Then you will have a circle of compliance, legal and administration and finally a set of vendor / partner relationship managers who will make sure that the downstream process and value chain is working in a tickety boo fashion. Bits are already in place but I would say that the full evolution has about 3 years still to run and we will soon see (post full MiFID impact in 2009), of a Nike/Nokia in the financial markets.

Nokia to outsource chip development

By David Ibison in Stockholm and Maija Palmer in London

Published: August 8 2007 19:09 Last updated: August 8 2007 22:58

Nokia, the world’s largest maker of mobile phones, is to stop in-house development of semiconductors for most of its mobile phones and outsource the business to third parties.

The Finland-based company said the move would free an undisclosed sum for research into more complex chips needed for its advanced multimedia, internet-enabled handsets.

Nokia will use four chipset suppliers – Texas Instruments, Broadcom, Infineon Technologies and STMicroelectronics. Chipsets are combinations of integrated circuits that operate together.

The Finnish company also said it would licence coveted modem technology for the first time, so generating additional revenue.

The decision to broaden its range of chipset suppliers and licence proprietary technology for high-speed WCDMA/HSDPA mobile phone chips will be an opportunity for chip companies such as STMicroelectronics and Broadcom to enter a new market.

Only Nokia, Ericsson Mobile Platforms and Qualcomm are believed to have the technology to make cost-effective WCDMA/HSDPA chips.

“We will have more players in the industry who will be total solution providers,” said Niklas Savander, Nokia’s executive vice-president for technology platforms.

On Wednesday, Nokia shares closed 4 per cent ahead at €22.48 in Helsinki. Broadcom rose 9.8 per cent to $35.98 by the close in New York and STMicroelectronics shares were little changed at $16.91. Infineon rose 2.7 per cent to €11.36.

However, Texas Instruments fell 0.3 per cent to $33.73 and Qualcomm slipped 0.3 per cent to $40.15.

Richard Windsor, an analyst at Nomura, said: “This is the most negative news for Qualcomm, which makes excellent margins in WCDMA chipsets.”

He added that the company will now face much greater competition and pricing pressure in the long-term.”

Nokia’s move to broaden its range of chip suppliers is also negative for Texas Instruments, which has been Nokia’s sole supplier of 3G and Edge semiconductors but will now have to compete with others.

Nokia plans to transfer 200 staff to STMicro.