Sunday, April 25, 2004
Qualcomm may consider manufacturing in China
Reuters Beijing, April 23
Qualcomm Inc said on Friday it may consider outsourcing production of its mobile phone chips to China's fledgling semiconductor industry as the US company's current suppliers run out of manufacturing capacity.
The company contracts manufacturing of its chips for cellphones to producers in Taiwan and the United States. It has been aggressively expanding its sales in China, the world's biggest mobile market with more than 250 million subscribers.
In releasing its quarterly results this week, the company said it was running into capacity constraints for its lower-end chip sets. It would be willing to consider production in China, said Wang Jing, chairman of Qualcomm China.
"It's certainly a possibility in the future depending on our technical evaluation," Wang told Reuters. "I certainly would not rule out that possibility," he said in an interview at the company's China headquarters in Beijing.
Such a move would underscore the importance that San Diego-based Qualcomm places on China, its number-four market for chip sales, behind North America, South Korea and Japan, Wang said.
It would also come as a boon to China's semiconductor industry, whose rising stars include recently listed Semiconductor Manufacturing International Corp (SMIC), and Grace Semiconductor, which also plans a public listing. Both firms are based in the Shanghai area, the centre of the nascent industry.
"It's entirely possible they may try to qualify SMIC or Grace for these chipsets," said an analyst at a major US brokerage, who spoke on condition of anonymity.
Qualcomm expects to sell some 14 million chipsets in China in its current fiscal year, Wang said. At a typical price of $15-$20 each, those sales could be worth as much as $280 million. The company reported earnings of $488 million for its fiscal quarter ended March 28 on $1.22 billion in revenue.
In another sign of its commitment to China, Qualcomm expects to make the first of an eventual $100 million in venture capital awards in the country in the next few months, Wang said.
The company could invest up to $10 million by the end of this year, Wang said. He added that future investments could also come in Hong Kong, where the local telecoms regulator recently said it would auction off a new third-generation (3G) wireless license based on Qualcomm's code division multiple access (CDMA) standard.
© Hindustan Times Ltd. 2004.