Nokia (NYS: NOK) will use chipsets from ST-Ericsson for future smartphones running Microsoft's (NAS: MSFT) Windows Phone platform, breaking Qualcomm's (NAS: QCOM) iron grip as the silicon supplier for the platform.
Nokia will use ST-Ericsson's NovaThor platform for the devices. In a statement, ST-Ericsson said the deal will allow "Nokia to extend Windows Phone devices to new price points and geographies," though it did not elaborate. Nokia has repeatedly said it wants to bring Windows Phone to lower price points than have been offered thus far.
In May Nokia indicated it would use Qualcomm's silicon for its first Windows Phone devices, and Qualcomm's Snapdragon processors power Nokia's first two Windows Phone devices, the Lumia 800 and 710. However, Nokia also said in May it was in negotiations with other chipset suppliers for the devices, including ST-Ericsson.
Nokia and Qualcomm have long had a contentious relationship, littered with disagreements over patent licensing and other issues.
Qualcomm has thus far been the sole supplier of silicon so far for all Windows Phone devices. Andy Lees, the head of Microsoft's Windows Phone division, told Bloomberg last month that Microsoft is working with suppliers, including Qualcomm, to get the cost of producing Windows Phone devices from around $400 down to $200. Lees said at the time that Microsoft had no plans to work with other chipset makers.
It's unclear how soon ST-Ericsson chips will find their way into Nokia's Windows Phone devices, or how much business ST-Ericsson will win from Qualcomm. Representatives for ST-Ericsson did not immediately respond to requests for comment. Regardless, the design win is a coup for ST-Ericsson, which has struggled since it was formed in 2009. ST's former wireless business was a key Nokia supplier before it was merged into ST-Ericsson joint venture between STMicroelectronics and Ericsson's (NASDAQ:ERIC) wireless chip businesses.
"As Windows Phone grows in popularity, it is natural to expect that they would diversify their number of suppliers," Qualcomm said in a statement to FierceWireless. "This has no impact on our commitment to Nokia and Microsoft and we look forward to continuing to work with all Windows Phone OEMs to deliver the best possible experiences on Windows Phone and Windows 8."
Forward Concepts analyst Will Strauss said he believes Qualcomm will likely continue to dominate all Windows Phone devices for at least the next several months and will be in all CDMA Windows Phone devices.
In-Stat analyst Jim McGregor said he was not surprised by the decision. "European companies tend to prefer other European companies. However, in the end, the company should be selecting the best solution based on cost, performance, and time-to-market," he told FierceWireless. "Based on this, I would expect a mixture of solutions between the two with Qualcomm likely occupying the higher-end devices. However, I worry more about the competitiveness of Windows and Nokia."
Article updated Nov. 2 with a statement from Qualcomm.
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