Marvell, Qualcomm set to duel over China's smartphone market

Marvell CEO Sehat Sutardja said the company intends to keep its foothold in China's low-cost smartphone market.

Marvell powers Lenovo A66t. Credit: Lenovo

China smartphones are powered by a standard called TD-SCDMA, which is being developed by the Chinese government to avoid being too dependent on the U.S. China Mobile holds the 3G license to TD-SCDMA, but that move has caused a few headaches. For instance, China Mobile sells Apple's iPhone for pokey 2G service and Wi-Fi. Nevertheless, many Chinese consumers are buying iPhones and relying on Wi-Fi.

For chipmakers, TD-SCDMA is seen as a way to crack China's potentially massive smartphone market. Marvell is the leader in China, but is about to face heat from Qualcomm.

Speaking on Marvell's third quarter earnings conference call, Sutardja said:

(The TD-SCDMA) business performed strongly in the third quarter and more than doubled from the previous quarter, resulting in TD smartphone market share of over 70%. Mass deployment of TD smartphones started in September, and many of these devices are now selling throughout the retail channel. Furthermore, China mobile is increasing its investment in TD and TD LTE and Marvell has a strong product lineup in both technologies to take advantage of this expected growth. While we expect increased competition from followers in TD smartphones, we expect to maintain our leadership position and grow revenues next year. Overall, we have made significant strides in developing and helping commercialize the TD standard in China, which we believe provides an ideal platform for low cost smartphones.

What remains to be seen is whether Marvell can hold its position in China. JMP Securities analyst Alex Gauna isn't so sure. He said in a research note that developments from Qualcomm may spell trouble for Marvell.

Indeed, Qualcomm said Wednesday that it launched its Snapdragon S4 processors, a family that includes TD-SCDMA capability.

Gauna said:

Qualcomm is first to market with 28nm technology and is already supplying a wide range of $130 and below 3G smartphones for emerging economies. We believe this effectively shuts the door on Marvell's ability to generate meaningful margins or growth from the China TD-3G market.

Sutardja swatted aside worries about Qualcomm. He said that Qualcomm was late to the business and behind. He said:

What we've been saying all this time, that TD is a real business opportunity. Now the dust is settled, it's clear that the market for TD is huge, especially China mobile with more than 600 million subscribers. Will eventually move the vast majority of their subscribers to TD. It is obvious more of the existing suppliers will build TD and it is expected and we've been saying it all along that everybody will realize that they have to invest in this. So we're happy, actually people are investing. So just proof that we're on the right track. The good thing is, we are ahead. We've been investing. Our device is qualified with all the base stations, not just one base station, but every base station in China. So we have at least a year, if not two years lead in this area.

Sutardja added that the age of $100 smartphones is arriving. "We're not talking about feature phones here," said Sutardja.