Jun. 4–Hoping to spread its brand of wireless technology, Qualcomm said yesterday that it will invest as much as $100 million in startup companies in China.
The money is part of the $500 million venture fund the company started in November 2000 to promote its patented technology called CDMA, or code division multiple access.
Qualcomm is keen on expanding the technology’s reach because the company makes money from selling CDMA wireless phone chips and from royalty payments anytime CDMA is used.
Peter Friedland, an analyst with WR Hambrect & Co., said Qualcomm has long tried to expand the reach of CDMA by investing in emerging markets. The concentration on China proves how important that country is to Qualcomm’s growth, he said.
“It doesn’t surprise me that they’ve decided to invest in Chinese companies,” Friedland said. “China and India are the two biggest markets out there.”
Previously, Qualcomm’s investments in emerging markets had focused on funding wireless operators in Mexico and Brazil.
In January 2002, Qualcomm also offered to invest as much as $200 million in India’s Reliance Communications Ltd. to help launch a wireless network, but the conglomerate recently decided it did not need Qualcomm’s cash to expand its wireless CDMA system.
By focusing on startup companies instead of wireless operators, Qualcomm is shifting its investment strategy to promote new wireless applications and devices.
Jing Wang, senior vice president of Qualcomm and chairman of Qualcomm China, said that producing compelling applications and stylish cell phones are key to CDMA’s growth in China.
“Overall, Chinese consumers are technology and fashion savvy. They like new products,” Wang said. “They do not look at a new cell phone as just a phone.”
Wang said that CDMA’s data capabilities are what will help the technology take off in China. China Unicom, the No. 2 cellular carrier in the country, has signed up some 10 million CDMA subscribers and hopes to have a total of 13 million by year’s end. Still, those numbers pale in comparison with the 110 million subscribers that use a competing technology called GSM, or global system for mobile communications.
Wang said there are plenty of Chinese technology companies looking for money to develop cutting-edge wireless devices and applications.
“China has a very attractive pool of technical talent,” Wang said. “There are many startup companies that are looking for capital.”
Qualcomm has plenty of money available, because only a small percentage of its $500 million venture fund has been invested, said William Keitel, the company’s chief financial officer.
So far, most of the money has gone to U.S. technology startups. The results have been mixed with several of the companies closing down, including SkyDesk, a San Diego online data storage company.
Keitel said it is too early to tell how the venture fund is performing because many of the companies being funded are so young. But he likened its performance to that of a traditional venture capital firm in which only a few of the funded companies do exceptionally well.
Friedland said Qualcomm’s investment strategy is different from a venture capital firm’s because its primary focus is to develop the CDMA market.
“Sure, they would like to get a return on investment, but they are really more interested in promoting CDMA,” he said.
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