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Qualcomm ups tally for cell phone chips

The company expects rising shipments this quarter and next, thanks to demand for newer phones that let consumers surf the Web and swap pictures.

Qualcomm expects to ship more cell phone chips this quarter and next, thanks to rising demand for newer phones that allow consumers to surf the Web and swap pictures.

The San Diego, Calif., company said Friday that it foresees increasing shipments of its MSM brand of phone chips as interest in third-generation, or 3G, handsets picks up.

Qualcomm manufactures chips mainly for phones that adhere to the CDMA (Code Division Multiple Access) standard. Based on orders received so far, the company said its MSM phone chip shipments should reach at least 28 million in its first fiscal quarter, ending Dec. 30. The company originally expected to ship between 25 million and 27 million units.

The shipments should represent an approximately 87 percent increase, year over year. About 80 percent of those shipments will come from the company's CDMA2000 1X MSM chip for 3G phones.

CDMA is the dominant wireless network format in the United States. Right now, however, 3G phones are offered mainly outside of the United States, with the largest markets being Japan, Korea and China. These new 3G phones offer faster data downloads than so-called 2.5G phones and include color screens and more powerful processors to allow consumers to view still pictures or even short videos.

Networks based on 3G technology had been much anticipated, but now that they're in operation, service has fallen short of its high-speed promise.

Meanwhile, carriers such as Verizon have begun offering 3G services in the Unites States.

Qualcomm also raised its shipment estimates for its second fiscal quarter, ending March 30, 2003. For that three-month period, the company predicts shipments of 24 million to 27 million chips, up from estimates of 20 million, a year-over-year increase of between 71 percent and 93 percent. The CDMA2000 1X product should account for slightly more than 80 percent of those chips.

"Our growth expectations are again being exceeded as cdmaOne and CDMA2000 1X networks continue to experience rapid growth and success in global markets," Irwin Mark Jacobs, Qualcomm's CEO, said in a statement. "We believe the continued growth of CDMA networks compared to other technologies primarily stems from the attractiveness to consumers and operators of 3G-enabled CDMA2000 1X handsets and the superior performance of CDMA systems."

Qualcomm's increased expectations fit with recent announcements from Advanced Micro Devices and Intel, both of which manufacture advanced flash memory used to store data in 3G phones.

The two chipmakers have reported strong demand for flash memory in the fourth quarter, with shipments expected to rise from the third quarter. They also expect demand to continue to increase in coming quarters.

Intel recently said it would increase prices for its flash memory by as much as 40 percent on Jan. 1, a sign that the company feels confident that demand will improve and that the memory will become more scarce.

The price increase was "driven primarily by demand for cell phones," Tom Beerman, an Intel representative told CNET News.com in late November.