Picochip has developed the industry's first femtocell reference design for China's homegrown 3G standard, TD-SCDMA (time division synchronous code division multiple access).

This is a significant development for the home base-station market and for China, as the country edges closer to the award of 3G licenses. (See Investments Line Up for Chinese 3G, TD-SCDMA Approaches $1B, and Femtocells Brace for Big 2008.)

The industry association for TD-SCDMA welcomed the femtocell development, and indicated that home base stations are likely to play a key role in Chinese operators' 3G networks.

“Femtocells are an important part of the TD-SCDMA ecosystem, and an essential part of operator strategy, particularly as we evolve to TD-SCDMA LTE," stated Yang Hua, secretary general of the TD-SCDMA Industry Alliance , in a press release. "PicoChip's achievement significantly pushes the TD-SCDMA industry forward.”

TD-SCDMA LTE is the next-generation, Long Term Evolution (LTE) version of the Chinese 3G standard.

The introduction of a TD-SCDMA femtocell reference design is significant because the availability of low-power home base stations could radically change the 3G network deployment strategies of China's operators. TD-SCDMA is expected to dominate the country's 3G scene due to strong government support. (See China Mobile 3G Contracts Awarded and AlcaLu Lands Big $$ in Little China.)

Chinese operators that choose to roll out 3G femtocells in homes to achieve better indoor coverage for voice and data services could find that they need fewer macrocells in the early stages of network deployment.

"Using femtocells in greenfield 3G and 4G deployments could enable operators to start offering services with a substantially reduced density of macro base stations on networks designed primarily for coverage," says Gabriel Brown, senior analyst at Heavy Reading. "Extra macro capacity could then be added as demand increases."

"It's a different approach to cellular network deployment that hasn't really existed before, and there's not yet a tried and tested template for how it should be done," adds Brown. "Operators at the leading edge will have to experiment as Sprint is doing with the Xohm [WiMax] rollout in the U.S."

TD-SCDMA femtocells are not expected to be available until early 2009 at the earliest. PicoChip did not reveal partners or customers for the femtocell reference design but believes the case for femtocells is compelling in the Chinese market.

"If you're launching a new network, the opportunity to get good indoor coverage right from the beginning makes this more interesting," says Rupert Baines, VP of marketing at picoChip. "If you can get indoor coverage with femtocells rather than macrocells, you'd need fewer macrocells, which would get your network up and running quicker and cheaper."

The new reference design is also important for picoChip because it rounds out the company's collection of 3G femtocell reference designs, which support WCDMA, CDMA2000, WiMax, and now TD-SCDMA. (See PicoChip Femto Does WiMax, PicoChip Adds Support, and PicoChip Supports HSUPA Femto.)

Of course, China's operators have not yet been awarded 3G licenses. The reason for the delay is now thought to be the anticipated restructuring of the market, rather than the technical maturity of TD-SCDMA. Local Chinese newspapers have reported that the government plans to carve up the telecom market and create three mega-fixed/mobile operators. (See Major Carrier Shakeup Expected in China.)

According to ABI Research analyst Hwai Lin Khor, the market restructuring will continue through the first quarter of this year and the first TD-SCDMA licenses will be issued at the end of the first quarter. Licenses for WCDMA and CDMA2000 will be issued six to nine months later, which would give TD-SCDMA a headstart in the market.

China Mobile Communications Corp. , China Telecom Corp. Ltd. (NYSE: CHA), and China Netcom Corp. Ltd. (NYSE: CN; Hong Kong: 0906) have deployed trial TD-SCDMA networks in 10 cities in the country, according to Hwai Lin Khor.

However, the wild card that makes it difficult to predict what exactly will happen in China this year is the Olympic Games in Beijing in August. The event could throw a spanner in the works for any market restructuring or license awards.

"The question is: Will there be a commercial [3G] launch before the Olympics or afterwards?" says picoChip's Baines.

— Michelle Donegan, European Editor, Unstrung