Qualcomm may take India call on price cut

Faced with the possibility of a declining market share, CDMA technology inventor Qualcomm is likely take up the issue of chipset price reduction for Indian market its forthcoming board meeting on July 19. If the cut happens, it will have a direct bearing on handset price costs.

The demand of Indian CDMA operators such as Reliance Communications on royalty reduction may not have been picked during Qualcomm CEO Pual Jacobs visit to India last month but the San Deigo-based company is in regular touch with operators for strategic discussions, according to a source.

The CDMA technology major's market capitalisation has taken a mind-boggling knock down of $15 billion, owing to several reasons such as Nokia's pullout of CDMA-based handset market and Reliance Communications' planned expansion into GSM based mobile services.

During his visit here, Jacobs is believed to have favoured the chipset reduction model over the royalty cut, which he said has no scope for further reduction as being already low. But he had not committed any time-frame for this.

Indian CDMA operators have proposed to Qualcomm to bring down the chipset cost at least at par with GSM chipset cost. In a low-end handest (40 dollar), the chipset for CDMA based handset is $10, while in GSM handset, the chipset is $5.

The gap of $5 is leading to an artificial increase of 12 per cent in handset costs. The $10 chipset cost is 25 per cent of the overall handset cost.

Operators are believed to have asked Qualcomm to reduce the chipset prices immediately rather than doing it over three years.

In its Q2 result announcement, the US-based company had stated "If we are not able to maintain or increase international market demand for our products and technologies, we may not be able to maintain a desired rate of growth in our business."

Jacobs during his meeting with Telecom Minister Dayanidhi Maran had said "We discussed more on how to bring down handset prices."