Chapter 689: Potential Crisis

[Chapter 689: Potential Crisis]

"To detail the advantages of CDMA over the first-generation FDMA analog signal technology and the second-generation TDMA digital signal technology, we created a cocktail party model. If each communication channel of an operator were likened to a cocktail party for networking," Irwin Jacobs eagerly promoted Qualcomm's CDMA technology to Eric during their meal at the manor.

He continued, "In the FDMA format 'cocktail party', only two guests can interact one-on-one at a time, which results in very low communication efficiency. In the TDMA model 'cocktail party', multiple guests can take turns communicating, which improves channel utilization, but at any given moment, only one user can speak. Our CDMA model 'cocktail party' completely breaks this limitation, allowing multiple groups of communicators to engage simultaneously in different 'languages'. Thus, thanks to this more efficient use of communication bandwidth, building a mobile communication network with CDMA technology will be far less costly than the second-generation digital signal technology."

Around the long table in the restaurant sat Eric, Chris, and five others, all listening intently to Irwin Jacobs's explanation. Only the little girl appeared somewhat distracted. However, Irwin Jacobs's clear and straightforward descriptions made it easy for her to grasp the advantages of CDMA. Noticing Eric nodding slightly beside her, she blinked innocently, feigning curiosity, and asked earnestly, "Mr. Jacobs, since CDMA is superior to... uh, the other two technologies, why did AT&T choose GSM as its technical standard?"

Eric turned to shoot a mild glare at the young woman for interrupting but refrained from reprimanding her, instead focusing on Irwin Jacobs.

Irwin Jacobs remained unperturbed by her question and explained with a smile, "Ms. Drew, it seems you hesitated for a moment because you might be confused about the terminology I used. Let me clarify: GSM stands for Global System for Mobile Communications, which is a more advanced digital communication technology developed on the basis of the second-generation TDMA technology. There are several reasons why AT&T chose GSM, but the most important is that GSM technology matured and became commercially viable before CDMA technology. AT&T has significant capital resources and does not need to be overly concerned about the costs of building a mobile network, so they opted for the widely adopted GSM technology. The fact that CDMA technology has yet to achieve any mature commercial networks is a significant disadvantage for us. However, Qualcomm has accumulated a decade of research experience in CDMA, and we are confident that the technology is now highly mature. Given a commercial opportunity, we can certainly demonstrate the superiority of CDMA to everyone."

As Irwin Jacobs concluded, his gaze landed on Eric.

Eric didn't immediately meet Irwin Jacobs's expectations but instead asked, "Irwin, do you know Nokia?"

Irwin Jacobs's expression shifted slightly. Of course, he knew Nokia, the telecommunications equipment and mobile phone manufacturer that had rapidly risen from the brink of bankruptcy. He replied, "If I recall correctly, the majority stakeholder of Nokia is an overseas company called Hawaii Fund, which is, in turn, an overseas investment fund established by Firefly Investment Company."

Eric nodded. His establishment of the Hawaii Fund aimed to follow Apple's strategy by securing Nokia's future profits overseas to avoid hefty corporate taxes in the U.S., a perfectly legal tax avoidance method. Thus, he had never intended to conceal the fact that Firefly Investment was, in reality, a stakeholder in Nokia.

Noticing a trace of doubt on Irwin Jacobs's face, Eric could guess what he was thinking.

Over the past two years, Nokia had emerged as one of the leading telecommunications equipment and mobile phone manufacturers in Europe, rivaling Ericsson, with the gap narrowing significantly. There had even been signs of Nokia overtaking Ericsson. The reasons for Nokia's rapid ascent in such a short time were not only the large investments from Firefly but also Nokia's pioneering technological layout in GSM and the technology's swift adoption; GSM was fundamentally the foundation for Nokia's rise.

However, while GSM technology had seen extensive adoption in Europe and Asia, it was still in its nascent stages in North America. Although North America's major telecom giant, AT&T, had identified GSM as its primary mobile technology standard, AT&T's deployment of its GSM network had only just begun.

Thus, in Irwin Jacobs's view, Eric should focus on helping Nokia promote GSM technology in North America and enter that market rather than extending an olive branch to CDMA, GSM's competitor.

Eric anticipated Irwin Jacobs's potential question and proactively explained, "Irwin, I know you might be puzzled, but I believe supporting Qualcomm and Nokia's development does not have to be mutually exclusive. After all, GSM and CDMA are entirely different generations of mobile technology standards, and Qualcomm and Nokia are fundamentally different companies.

I even hope that Qualcomm and Nokia can form a close cooperative relationship in the future. We'll discuss these details later. My mentioning Nokia was for a specific reason. Although Nokia is currently growing rapidly, it faced a significant corporate crisis in the latter half of last year. Chris is more informed about this as he spent considerable time addressing the issue towards the end of last year. Let him share."

Everyone turned to Chris. Although he was somewhat confused as to why Eric had suddenly brought up this matter, Chris explained, "Before 1992, Nokia produced only several hundred thousand mobile phones each year. However, after 1992, due to the strong market demand brought on by the proliferation of GSM technology, sales of Nokia's telecommunications devices and mobile phones increased exponentially. Last year alone, Nokia sold 3.1 million mobile phones.

The surging demand for production almost caused Nokia's component supply chain to collapse. Therefore, the CEO of Nokia, Jorma Ollila, and I spent months at the end of last year completely overhauling Nokia's supply chain to ensure that Nokia could meet the ongoing demand in the expanding mobile communications market."

Irwin Jacobs had been racking his brain to promote CDMA technology but had not considered the long-term implications. Upon hearing Chris discuss Nokia's crisis from the previous year, he began to realize something.

At this moment, Eric added, "As far as I know, currently, aside from a few manufacturers still producing first-generation analog mobile phones, nearly all mainstream telecom manufacturers producing digital phones are using the GSM standard. Qualcomm has spent the last decade focusing on technological research and development and has similarly lacked the capacity to produce CDMA devices. So, if any major telecom operator chose CDMA technology as their standard, how does Qualcomm intend to deal with the sudden market demand for millions of CDMA devices?"

*****

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