More China challenges for Qualcomm

Qualcomm has long been frustrated by China's on-again, off-again plans to build a CDMA network

In this story: CDMA holdup CDMA standard war RELATED STORIES, SITES

By CNN's Kristie Lu Stout

HONG KONG, China (CNN) -- Challenges abound for U.S. wireless technology company Qualcomm as it sows the seeds of expansion in China's market of 85 million mobile users.

Addressing reporters at this year's Fortune Global Forum, Qualcomm chief executive Dr Irwin Jacobs shared the difficulties of courting China in a time of political flare-ups and CDMA standard wars.

For Qualcomm, the stakes are massive. Industry watchers predict China will surpass the U.S. as the world's largest wireless market by the end of this year.

CDMA holdup

Jacobs' visit to China comes after a signing ceremony between China Unicom and seven CDMA equipment suppliers was delayed. Some analysts attribute the holdup to an increasingly volatile U.S.-China relationship.

The $1.7 billion deal would boost Qualcomm's fortunes, since it would earn royalties on the sales of the CDMA equipment to China's second largest mobile operator.

"Clearly the tension has increased. It's in both countries' advantage to reduce tension to go back to economic cooperation between the two countries," said Jacobs.

"If it increases, it could interfere with economic activities, and this could be one of them."

But Jacobs said despite the contract delay, progress has been made to bring Qualcomm's wireless technology to China.

"As for as Qualcomm is concerned, we've signed an agreement with Unicom to license Chinese manufacturers to use CDMA technology to build infrastructure and equipment. That's moving ahead."

Qualcomm has long been frustrated by China's off-again, on-again plans to build a CDMA network.

"We wish we could go faster, but there are factors outside our control," said Jacobs during the Forum's first panel discussion Tuesday.

After the U.S. bombing of the Chinese embassy in Belgrade in May 1999, Unicom brought CDMA negotiations with foreign vendors to a standstill for six months.

"It's been a political football since its inception in 1995 when the first trial CDMA networks were put into place," telecom analyst Duncan Clark, who heads the Beijing-based consulting firm BDA, told CNN.

CDMA standard war

Qualcomm faces yet another challenge as it courts the China market: an intensifying battle of CDMA standards within the country's borders.

Three competing standards -- WCDMA, TDSCDMA, and Qualcomm's CDMA 2000 -- are being considered for rollout in China, whose mobile infrastructure is already dominated by the GSM standard.

TDSCDMA is the mainland's variant of Qualcomm's CDMA technology developed a few years ago by a Chinese research institute.

"I suspect given some of the country's interests, each of the technologies will be used," said Jacobs.

But Jacobs is confident Qualcomm's CDMA 2000 technology, an upgrade of its original CDMA standard, will be the first to be deployed.

"The first one in use will probably be CDMA 2000. The standard is stable and the equipment is available. CDMA 2000 phone equipment is available in Korea. And we're talking to Chinese manufacturers about making CDMA phones in China."

Jacobs said Qualcomm is in talks with 13 Chinese mobile equipment makers, but did not disclose any names.

The Fortune Global Forum is organized by Fortune magazine, a unit of AOL Time Warner. CNN is also part of AOL Time Warner.

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