Qualcomm licence to HFCL for handsets

In a move that could bring down prices of CDMA handsets further, Qualcomm Inc has licensed Himachal Futuristic Communications Ltd (HFCL) to manufacture 3G CDMA2000 mobile handsets, fixed-wireless phones and line modem cards.

This is the first time Qualcomm has given a licence to a company in India to manufacture its products. The move comes at a time when Qualcomm has been under fire from Reliance Communications for its high royalty on chipsets. Reliance cited this as the key reason that compelled them to change their focus from CDMA to GSM.

HFCL will invest Rs 25-30 crore to upgrade its plants in Solan (Himachal Pradesh) and Chennai to manufacture over 4 million handsets and fixed-wireless phones annually.

"We hope to sell two-thirds of our phones in India and the rest in the export market. There is a requirement of over 20-25 million CDMA phones a year and we will be able to fulfil about 10-15 per cent of that supply need," said Mahendra Nahata, chairman of HFCL. Nahata hopes to hit a turnover of over Rs 600-800 crore through this order

Prices of CDMA phones could drop by around 4-5 per cent due to savings in import duties and, of course, other advantages of manufacturing in India.

Prices of entry-level Qualcomm phones, around $40 in June, have fallen to $38 due to technological innovations, and could decline by another $2 as a result of the agreement with HFCL.

However, Qualcomm has made it clear that HFCL will pay royalties on the chipsets at global rates (around 5 per cent of the handset cost).

Many Indian operators have been demanding parity with China, where the US company had earlier offered lower royalty rates to domestic manufacturers of CDMA products, provided they sold it within the country.

However, experts say the savings due to the indigenous manufacture of the sets was equivalent to what customers would have saved in case the royalties were cut by half.

While not commenting on whether the move would lead to a fall in the price of handsets, Kanwalinder Singh, president of Qualcomm India, said: "Our prices have already fallen without any change in royalty terms. We are looking for as many OEMs in India as we can find. Our effort is always to bring prices down and we will provide HFCL all the technology, design and pre-testing of handset support that they require."

Singh also said both LG and Samsung were also planning to manufacture CDMA handsets in India.