Sanyo and Nokia part ways on CDMA

Posted by: Kenji Hall on June 22, 2006

How will the CDMA standard fare after Nokia, the world’s biggest mobile phone maker, and Japan’s Sanyo Electric dissolved their joint venture to develop CDMA phones? It’s anyone’s guess. Qualcomm developed the CDMA standard, which runs parallel to the GSM standard in the U.S. A Nokia-Sanyo joint venture might have given the CDMA standard—which accounts for up to 30% of the world’s 2 billion cell-phone users (mostly in the U.S. and Asia)—a better shot at making a run at GSM’s dominant 70% share. One reason often cited for GSM’s dominance is the lower price of handsets for that standard.

Investors were obviously spooked by the news: San Diego-based Qualcomm’s shares have taken a hit. Small wonder. For Qualcomm, it would have meant lucrative chip sales and licensing deals.

Still, Nokia and Sanyo don’t seem to be quitting the business just yet. Back in February, Nokia had unexpectedly tied up with Sanyo. At the time, it had seemed a last-ditch effort to keep one foot in the business of making phones for CDMA. That interpretation may have to be revised since the Finnish company is still in very much in the game.

For struggling tech maker Sanyo, it’s a different story. Sanyo’s phone technology is first-rate and a key piece of its operations. But it’s been going through some painful restructuring. The joint venture had allowed Sanyo to get ahead without exhausting too much of its resources, and would have helped it expand into regions outside its home market. Now, Sanyo will have to go it alone.

Who knows what led to the breakup. Nokia execs called the arrangement “less beneficial than originally anticipated.” Sanyo’s officials didn’t comment directly on what happened.

As far as I can tell, Sanyo has two options: retreat or find another partner. Relationships come and go. I’m betting Sanyo will look for another to replace Nokia.

Reader Comments

David Wolf

June 23, 2006 3:48 AM

Nice note, Kenji.

Actually, I think that CDMA, in the forms of IS-95 and CDMA 1xRTT, is already morphing into its 3G flavors - CDMA 1xEV-DO, whose future is in little doubt due to uptake in Korea, Japan, and especially North America; WCDMA, the European flavor (which, as acknowledged by 40 major handset manufacturers, relies on QCOM patents); and TD-SCDMA, which is of as-yet-unresolved parentage from a QCOM standpoint.

GSM and CDMA will be important technologies for high-growth markets, especially South Asia, Africa, and parts of Latin America, but in the more developed regions of the world the story will increasingly be 3G technologies.

The question now for Sanyo is whether it can compete in all of these markets (and if so, how) in an industry increasingly dominated by 4-5 major players, or be forced out out of the mobile phone business entirely. The difference, as you correctly imply, hinges on whether Sanyo can find a new dance partner.

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