Motorola gets gutsy

Motorola is returning to its embedded semiconductor technology roots by selling its expertise to other handset developers for the first time.

Motorola's semiconductor product sector now is a part of its wireless strategy, said Pete Schinyeda, corporate vice president and general manager of Motorola's wireless and broadband systems group.

“We are adding our semiconductor business to our handset approach in order to go after a total platform solution for the handset business,” he said.

Motorola will compete in the chip space with big players such as Texas Instruments, which works with Ericsson and Nokia.

“This is gutsy for Motorola,” said Will Strauss, president of Forward Concepts. “Until now, 80% of its digital signal processor sales were to other Motorola divisions.”

Strauss believes Motorola's communications industry knowledge, software expertise and variety of wireless chip technology will give it an edge over competitors.

But the biggest strategic edge may be in vying for business from Tier 3 handset manufacturer countries such as Taiwan and China, where the wireless market is expected to blossom by 2004. Motorola has made several inroads in China, where it plans to open a semiconductor plant, Strauss said.

“Motorola has the advantage of having a name that is well known in China, and it was the first manufacturer to set up an assembly facility there,” Strauss said. “[The Chinese] like any company from the West that will bring technology to them.”

It has not been a good year for handset semiconductors because of the component glut carried over from 2000, but the market should improve in 2002, said Allen Nogee, senior analyst at Cahners In-Stat Group (see figure).

Turnaround to begin next year Total worldwide handset  semiconductor revenue (in millions of dollars)
2000	$13,470
2001	$10,900
2002	$17,470
2003	$22,336
2004	$26,239
2005	$27,990
Note: Numbers represent all interfaces except PHS and iDEN Source: Cahners In-Stat Group

Motorola believes it can grab 25% to 30% of the market, Schinyeda said. “We have all of this capability, so we can take a complete arsenal to the entire marketplace, which means we can grasp more of a share of the [potential] $35 billion wireless chip business,” he said.

Motorola's strategy is not completely unique within the wireless market. Qualcomm has based much of its business on selling its technology to other handset vendors. However, Qualcomm recently postponed the spinoff of its semiconductor business. Schinyeda would not comment on speculation that Motorola might spin off its semiconductor unit.

Nogee believes the semiconductor unit is so entwined with Motorola that a spinoff would not be wise, noting Qualcomm has postponed the spinoff of its semiconductor business.

“This is the core competency of Motorola, and it did not work well for Qualcomm,” Nogee said. “If you spin off your core competency, then who are you?”

But Strauss does not dismiss the possibility of a spinoff.

“Watch this [semiconductor] space — this still is a distinct possibility. Motorola's division is world class and can survive on its own.”