Skip to main content

Wireless chip giant

Qualcomm

(QCOM) - Get Qualcomm Inc Report

may be on track for a sales "windfall," according to a

Korea Times

report this morning. But some analysts expressed doubt.

The South Korean government reportedly is mulling new legislation to incorporate location-tracking technology into upcoming generations of cell phones and wireless services. Such a decision would force handset manufacturers including the world's third-largest maker,

Samsung

, and smaller rival

LG Telecom

, to pay higher royalty rates to Qualcomm.

Qualcomm holds the intellectual property patents to South Korea's prevailing wireless technology standard, code division multiple access, or CDMA. CDMA is used by U.S. carriers

Verizon Wireless

TheStreet Recommends

and

Sprint PCS

(PCS)

.

The South Korean move would follow on the heels of similar mandates worldwide. In the U.S. all cell phones sold to consumers now are shipped with so-called global positioning system, or GPS, capabilities, say analysts. While GPS technology is primarily incorporated into U.S. cell phones for safety reasons, it also is being considered for more entertainment-driven applications such as helping subscribers locate the nearest restaurants or bars. In traffic-snarled cities such as Tokyo, GPS-equipped cell phones help subscribers navigate various locations.

Wall Street analysts said the potential upside for Qualcomm might not be as big as the report suggests. "I'm not sure it would be a windfall," said Hasan Imam, a wireless-equipment analyst at Thomas Weisel Partners. "The biggest impact would be incremental share gains from the few hundred thousand

chips that Samsung currently sells --

Samsung's chips don't have the capability to offer GPS features."

Deutsche Bank Securities analyst Brian Modoff estimated that Qualcomm would be likely to generate $5 more per chip from the possible Korean legislation. GPS "phones will be phased in over time," he said. "So

there's no immediate windfall."

The development might be another roadblock to Samsung's efforts to pry open Qualcomm's iron-clad grip on its CDMA technology. Even as Samsung depends on Qualcomm for the bulk of its advanced cell-phone chips, the Korean electronics giant has been trying to cut back its reliance on the San Diego company. Samsung has developed and is currently selling a less-advanced CDMA chip for low-cost mobile phones to one major Korean wireless carrier.

Qualcomm generates about 40% of its sales from South Korean handset vendors, according to filings. It does not break out sales by vendor.

Qualcomm wasn't immediately available for comment. Its shares were up 39 cents, or 1.1%, to $36.62 in late-morning trading.