CDMA on hold: Qualcomm technology thwarted in China - for the moment

According to the CDMA Development Group, more than half of the world's CDMA users live in Asia. But when a major carrier in the region's largest country decided not to buy Qualcomm's narrow-band CDMA technology, the technology's push into China seemed to come to a halt.

Though it may be the company with the most riding on whether China opens its doors to CDMA, Qualcomm - whose officials did not respond to interview requests - was not the only company concerned that the technology might be overlooked.

"We were disappointed to hear [the news], but we still forecast it will be a big CDMA market," said Jan-Anders Dalenstam, senior vice president of business development and strategic marketing for Ericsson's CDMA systems business unit.

The country's second-largest carrier, China United Telecommunications, reportedly still may use Qualcomm's wideband CDMA technology by 2003. This decision came down from some country officials that believe it would be wasteful for the country to pour billions into technology that will be outdated in the next few years. The country's 800 MHz spectrum would be best used if cdmaOne or cdma2000 systems were deployed, Dalenstam said.

At this point, Ericsson is waiting for authorities to announce further details but does not expect the recent activity in China to disturb its business plan regarding CDMA in China, Dalenstam said.

Although China might be focusing on the GSM standard now, anything is possible as the next generation technology rolls out, said Larry Swasey, vice president of communications research with Allied Business Intelligence. "Maybe, when 3G base stations start going out, CDMA will enter the picture a bit more," Swasey said.

According to a CDMA Development Group report, CDMA subscriber growth in the Asia-Pacific region increased dramatically between September 1997 and December 1999 (see figure). Although the technology is strong in Asia-Pacific countries such as Japan and South Korea, China has been considered a critical market for future CDMA growth.

To hedge its losses, Qualcomm intends to encourage Chinese production of CDMA equipment and announced CDMA development agreements with a Chinese technology group and manufacturer.

China Unicom might turn to CDMA in the future, but the fact it is avoiding it today leaves the industry uneasy. "If Unicom truly decides not to use the technology, it will be a huge blow to CDMA purveyors," Swasey said. "Many have looked to the country to be the next CDMA market."

Although CDMA is strong throughout North and South America, Japan and South Korea, a lack of presence in China would hurt its progression of because of the country's size. But Dalenstam remains positive about CDMA's future. "The potential in China is enormous. It only is a matter of time."