Qualcomm's 3G Chips Chopped

A ban on some phones using Qualcomm Inc. (Nasdaq: QCOM) chips won't exactly shake the industry, analysts say.

A statement from research firm ISuppli Corp. today says the ban "will have only a limited impact on the global wireless communications industry in the short term." It estimates the ruling will affect 4.2 million phones, just over 4 percent of the U.S. market, in the second half of 2007.

The ban stems from yesterday's International Trade Commission (ITC) ruling that Qualcomm's baseband chips for handsets violate a Broadcom Corp. (Nasdaq: BRCM) patent related to power management in mobile. The ITC has blocked imports of phones using wideband-CDMA and CDMA EV-DO (evolution-data only) silicon. The ban only applies to handsets made after June 7 and not those already on the market.

If upheld, the ruling will be bad news for Sprint Corp. (NYSE: S) and Verizon Wireless . Both carriers have extensive EV-DO networks in place and have been seeing increased revenues from the data downloads that these phones help to facilitate. (See Sprint's Cold Call Quarter.)

The ruling continues a long running battle between the companies. In May, a federal court jury found that Qualcomm had infringed on three Broadcom patents, and awarded the firm $19.6 million. Qualcomm says it plans to seek a stay and a presidential veto.

W-CDMA and EV-DO phones are among the newest 3G phones in the United States. Handsets using this technology can offer average downloads in the hundreds of kilobits per second range as opposed to the tens of kilobits per second by earlier models.

Despite the ruling Qualcomm's shares rose 2 percent on Friday to $41.87.

— Dan Jones, Site Editor, Unstrung

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