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Cheap chips to thwart sales dip?

Qualcomm has introduced some cheaper, stripped-down cell phone chips in the midst of a handset sales dip.

Qualcomm has introduced some cheaper cell phone chips in the midst of a handset sales dip.

The company is shipping to 40 handset makers another in its long line of chipsets that power cell phones. But these are stripped-down versions, eliminating many of the new technology features that handset makers have begun adding to phones, like MP3 players or cameras.

Instead, these chips will focus on handsets that offer the ability to send a short text message between two phones, or make a voice call, said Qualcomm spokeswoman Anita Hix.

Qualcomm balked at discussing just how much cheaper the handsets might be, leaving that up to the troika of handset makers and wireless carriers that usually set the prices. Handset makers such as Motorola and Nokia said they have yet to set any pricing plans.

Analysts said Qualcomm's new chips are another sign of the disappearance of the cell phone industry's version of the middle class--something in between the phones that can do more than just get a voice call but aren't the software-packed, steroid monsters that cost as much as $500 apiece.

"This might be just ducky" for markets in North America, Asia and Australia where the handsets might show up, said John Landry, an analyst with market researcher IDC. "You're going down market with cheaper stuff. But it's another indication that the middle ground is rapidly becoming no man's land."

The phones could also end up digging into the extra revenues that carriers are counting on from cell phone users who download music or games for a fee. When new cell phone networks launch, the wireless industry is hoping cell phone owners will start quickly speeding e-mails to a cell phone or downloading a video to watch on a phone's tiny screen.

The cheaper chips are being introduced at a time when handset sales are, for the first time in years, in a slump. The decline has been so powerful that even leading cell phone maker Nokia, which once seemed impervious to the cell phone flu, has been forced to reduce its projected revenues and the number of cell phones it will sell.

The slump also comes as many wireless carriers are spending billions to create a new generation of cell phone networks called 3G to offer always-on capabilities at broadband speeds. But to do so, carriers are spending billions that they don't have on hand, digging themselves a debt hole they may be slow to climb out of.