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Qualcomm banking on dual-role chip

The company is working on a new semiconductor that would allow cell phones and handhelds to be controlled by a single chip, a potentially huge market.

    Qualcomm wants to kill two birds with one chip--with the help of Microsoft.

    Qualcomm is working on a new semiconductor that would allow cellular phones and handheld computers to be controlled by a single microprocessor. The new chip would essentially allow Qualcomm to offer devices that are both a mobile phone and a handheld computer at a potentially lower price than competitors' devices that need two chips.

    A single chip also is likely to allow Qualcomm to make the next-generation devices smaller than those with multiple semiconductors.

    Sources said the dual-role chip--which incorporates code for both the division multiple access (CDMA) wireless technology as well as Microsoft's Windows CE operating system--is expected to be available by the end of 2000 or in early 2001.

    The new chip could boost demand for Qualcomm's wireless technology and increase sales of Windows CE as analysts and industry insiders foresee a huge global market for wireless data fusion over the next several years.

    "The idea is that cell phones become more than voice-centric devices," said Dale Ford, principal analyst for semiconductors at Dataquest. "Windows CE can be used for handsets that provide other functions," such as personal information management.

    Qualcomm has confirmed that the microprocessor, currently in development within the company's CDMA Technologies group, is tentatively being called the MSM 4000. MSM stands for "mobile station modem," according to the company, which declined to speculate on when the MSM 4000 might be available.

    "You can't just dump an OS onto a chip," said Qualcomm spokeswoman Anita Hix, noting the amount of code writing and integration that has yet to be done.

    Microsoft and Qualcomm have been working on the chip since they teamed up for the WirelessKnowledge joint venture last year. That venture, set to begin service in May, will extend corporate groupware applications to business users on the go. But it will also expand Microsoft's software into a new market for the company.

    At the time, the companies announced the planned integration of Windows CE into a future Qualcomm ASIC (Application Specific Integrated Circuit) chip, but offered no further details. The new chip design is the first concrete evidence that Qualcomm and Microsoft are expanding their relationship beyond wireless data services to the more elemental market for cell phone chips.

    Qualcomm believes that by developing a single chip that powers both a CDMA-based mobile phone and Microsoft's operating system, Qualcomm is given an early market advantage over competitors.

    "The time to market to get into a handset won't be as long as somebody who decides to buy a CDMA chip and put it together with a Windows CE chip," Hix said.

    Microsoft has made its fortune largely in the desktop personal computer market, but worldwide mobile phone sales are expected to far outpace PC sales over the next several years. Many analysts expect more than 200 million wireless handsets to be sold in the world this year.

    Microsoft's push takes on even greater significance now that Qualcomm and its chief rival Ericsson have negotiated a truce in their battle over global wireless standards--Ericsson uses the competing GSM wireless standard.

    The two wireless equipment companies will now share technologies after Ericsson agreed to acquire a Qualcomm business unit last week. That deal, industry insiders say, could eventually lead to a new global standard. And that translates into a potentially larger market for Qualcomm's MSM 4000.

    In 1998 alone, 175 million cell phone handsets were made, driving a $9.5 billion chip market--one of the fastest growing semiconductor segments, according to Ford.

    Microsoft and Qualcomm won't have unfettered access to the market, though.

    The three largest handset makers--Nokia, Ericsson, and Motorola--have teamed up in the Symbian venture in an effort to come up with next-generation phone designs that won't use the Windows CE operating system. And service providers themselves have to be sold on the benefits of these fancy phones. Those manufacturers who come up with the right formula first, though, will win big, say industry insiders.

    "Manufacturers who can incorporate Windows or whatever operating system they have into a device, make it attractive, and easy to use, that's the company who will lead the revolution in these consumer devices," said Pete Scarzynski, vice president of sales and marketing with Samsung's wireless terminals division.

    Samsung last year developed a Windows CE cell phone complete with spreadsheet and other functionality, but wireless carriers have so far expressed little interest in the product. In the meanwhile, the company has developed a phone that uses software technology from Unwired Planet that allows for limited data and Internet connectivity.

    "We are trying to take the phone as it exists today and add functionality," rather than combine a phone and handheld device, he said. Scarzyinski said the market for advanced cell phones will boom three to five years down the road as voice activated controls become more commonplace.

    Hix said ongoing development of the MSM 4000 chip would not interfere with the company's efforts to develop the pdQ phone with 3Com. 3Com's Palm Computing division owns the Palm OS, the operating system for its PalmPilot line of handheld computers.