TI links with Japanese vendors for UMTS venture

The same consolidation of resources occurring among wireless equipment and handset vendors is now happening in the wireless chipset business. Leading wireless semiconductor maker Texas Instruments is partnering with two of Japan’s largest vendors to develop a joint venture called Adcore-Tech, focused on developing, designing and licensing W-CDMA chips.

Based in Yokohama, Japan, Adcore will be 44% owned by NEC and its subsidiary NEC Electronics, 44% by Matsushita and its handset unit Panasonic Mobile Communications, and 12% by TI, with the combined companies laying down Yen 12 billion (U.S. $104 million) in capital. The company will open its doors in August with about 180 employees and work toward creating its first commercial chipsets by the fall of 2007.

The industry is seeing a growing number of cross-vendor partnerships as well as consolidation. Sony and Ericsson pooled their handset divisions three years ago to emerge as the No. 4 phone manufacturer last quarter. Nokia and Siemens plan to combine their network infrastructure divisions. The TI/Matsushita/NEC deal, however, is the first major tie-up between wireless semiconductor makers, indicating that the demand for economies of scale are being driven all the way down the supply chain to the components manufacturers.

The TI-Japanese toed-up, however, seems to be indicative a new type of joint venture focusing on specific technology rather than a whole legacy technology portfolios. Earlier this week, Motorola and Huawei announced a plan to merge their UMTS network R&D, and Nortel Networks and LG Electronics have formed a joint venture focusing on WiMAX and 3G technologies. Adcore will focus specifically on Wideband CDMA, which is the core technology in both Japan’s Foma networks and standardized UMTS networks around the world.

TI is already the leader in W-CDMA chipset sales, but the company has been experiencing increased pressure from Qualcomm, which owns some of the key CDMA intellectual property used in the technology. Qualcomm has made strides in boosting its market share in W-CDMA from 10% two years ago and now has 30 handset vendors either buying or trialing its baseband modem chips. Qualcomm CEO Irwin Jacobs has made clear his intention of surpassing TI and gaining a 50% market share in this highly lucrative market.

While Matsushita and NEC plan to incorporate the new chipsets from the venture into their own handsets, all of the companies have agreed to cross-license the technology to one another and in turn sell the chipsets to other handset vendors as well as strike licensing agreements pertaining to related software and technology. Matsushita and NEC struck a separate deal to form a development company that will develop a common software and hardware platform for their handsets, presumably using the new Adcore chipsets.

In other chipset news, Qualcomm today said it is contracting with Semiconductor Manufacturing International to press its communications chipsets in its foundry in Tianjin, China