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NXP Woos China Mobile orders for handset chips

"It makes no sense for us to make chips at our European plants since Asian companies are doing quite well."

Stephen Lin, vice president of NXP Semiconductors

NXP Semiconductors, the world's 10th largest chipmaker, said yesterday China Mobile Communications Corp (中國移動) planned to purchase handset chips from NXP to sell 3 million to 5 million 3G handsets this year.

NXP Semiconductors said it was optimistic about the development of TDSCDMA technology, the China-grown 3G mobile standard, in light of the Beijing Olympic Games and government support.

"The political atmosphere is in favor of the development of TDSCDMA and we believe government agencies will increase their measures to foster market growth at upcoming meetings in March," Stephen Lin (林博文), vice president of NXP Semiconductors' greater China operations, said in Taipei.

Lin said NXP Semiconductors would lead rivals in supplying TDSCDMA chips for mobile phones that let users access content about the Olympic Games in August.

The Eindhoven, Netherlands-based company plans to supply chips for thousands of TDSCDMA phones during the Games, Lin said.

For the full year, NXP Semiconductors expect to ship 3G chips for 3 million to 5 million phones for China Mobile, the biggest mobile carrier in China. China Mobile is expected to run a trial of the 3G technology in 35 cities, although Beijing has not granted any 3G licenses yet, Lin said.

Last year, China Mobile's TDSCDMA phone sales were low, at only several thousand units.

Growth next year is expected to be even faster as shipment volume should grow faster after breaking the 5 million-unit threshold this year, which will be a critical period for the development of TDSCDMA technology, Lin said without giving detailed figures.

Meanwhile, bigger rival Texas Instruments Inc (TI), the world's biggest handset chipmaker, is taking a conservative approach to TDSCDMA chips.

"We will supply TDSCDMA chips in accordance with customers' demand," Larry Tan (陳維明), president of TI's Asia operations, said in Taipei on Thursday.

NXP Semiconductors has invested in developing TDSCDMA technology over the past six years, during which it entered a four-way venture, T3G Technology Co, with Datang Telecom Technology Co (大唐電信), Samsung Electronics Co and Motorola Inc to develop TDSCDMA phones.

Separately, Lin said NXP Semiconductors would continue its asset-light strategy this year. The company hopes to improve its financial performance by outsourcing more production to partners including Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), based in Hsinchu.

"It makes no sense for us to make chips at our European plants since Asian companies are doing quite well. And it is expensive to build next-generation plants," Lin said. "We certainly will increase outsourcing production of CMOS [image sensors], if the price is right."

NXP Semiconductors has been ordering CMOS sensors from TSMC, Lin said.

In 2006, about 22 percent of NXP's total revenue of 5 billion euros (US$7.3 billion) came from the greater China market, the fastest-growing chip market in the world.
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