DoCoMo Invests in Chip Makers
By Eric Lin, Wed Jul 14 00:45:00 GMT 2004

NTT DoCoMo announced it would invest in $50 million in Texas Instruments and $65 million in chip maker Renesas to develop single-chip 2.5G/3G processors.

DoCoMo will give Renesas $64.7 million over three years to develop a single chip integrating W-CDMA, GSM/GPRS and an SH-mobile 4 core. Renesas will then sell this on to DoCoMo handset partners to include in future phones. They don't expect to have samples ready until early 2006. The partnership with Texas Instruments will result in similar processors on the same timeline. The only difference is that the TI chips will run on their OMAP core.

By making these investments DoCoMo hopes to speed development of highly sought after chips -- ones that could reduce unit cross, power consumption and device size. Since FOMA is compatible with, but does not exactly conform to UMTS, DoCoMo cannot rely on chip makers to produce compatible 2G/3G chipsets on their own -- there simply isn't a high enough demand in the chip makers' eyes. By making an investment, DoCoMo can be sure that the necessary manpower is put on the project to get the chips it wants in a timely manner. Other companies in the processor minority (like Apple) have made similar deals in the past, however this is the first time that an operator (not a manufacturer) has entered into a financial deal with a chipmaker.

DoCoMo also expects that this investment will lower the cost of the chips it is asking manufacturers to include. Currently DoCoMo's bottom line is suffering from the huge subsidies it pays on 3G handsets (averaging about $350 per unit). Last year DoCoMo also provided financial assistance to handset makers for 3G development costs, furthering the gap between phone cost and what the subscribers pay. If DoCoMo can help lower the cost of components, it should see a reduction in the unit cost, lowering the amount it is forced to pay out to 3G manufacturers in subsidies.

The chipmakers could benefit as well. using the techniques developed for DoCoMo's chips to create similar components for more standardized W-CDMA/GSM networks.

Companies that are technology leaders or mavericks rarely get to benefit from component standardization since they're usually ahead of the technological curve or use a slightly different standard (or both). As long as DoCoMo launches technology before any other carrier, its components are unlikely to be "cheap as chips." However by funding development at the most basic levels, it can reduce costs as well as reducing product cycles.