In the news
Jan 25, 2014

H-P Chromebook Points to Trends in Chips, Patents

The Wall Street Journal

By Don Clark

A visit to Best Buy sometimes brings insights about where manufacturers are placing their bets. One example is a Hewlett-Packard Chromebook that recently appeared in the store’s computer section.

The laptop, which first arrived in a Wi-Fi-only model, now comes in a version with built-in cellular connectivity, too. That’s a nice feature for a Chromebook, since the increasingly popular Google-conceived devices were designed mainly for online use with Web software.

But H-P’s choices of suppliers for what it calls the Chromebook 11 were a bit unusual.

Instead of turning to a well-known company like Qualcomm for cellular technology, for example, the H-P Chromebook uses a wireless chip from Israel-based Altair Semiconductor, which only communicates using the fourth-generation technology known as LTE.

Qualcomm modems typically can communicate using older technologies like 3G, too, to connect in areas where LTE is not available. But there’s an extra cost in buying from the San Diego company; besides paying for chips, hardware companies also pay Qualcomm a patent royalty, calculated as a percentage of the price a customer pays for a handset or other device.

The big chip maker has successfully collected such royalties for years on its 3G technology. But the royalty implications of LTE-only chips are a little less clear.

Paul Jacobs, Qualcomm’s chairman, insisted in an interview during the Consumer Electronics Show that Qualcomm has important patents that cover LTE. He expects makers of LTE-only devices also to make royalty payments.

They may be lower, however. Jacobs said the company expects royalty rates for LTE-only products to be in the range of 3.25%, while 3G devices are closer to 5% of the price of a piece of hardware.

Eran Eshed, Altair’s co-founder and vice president of marketing and business development, says the royalty situation remains a bit murky, since there are so few LTE-only products on the market now–and Qualcomm’s claims have not been tested in a court case or a licensing deal made public.

“It’s not something I can say has been validated in the marketplace yet,” Eshed said. “It takes a lawsuit, or a few cases where somebody would pay.”

An H-P spokeswoman declined to comment on royalty issues associated with the new Chromebook. She stressed the speed LTE offers as a major factor in its technology decisions, but also pointed to cost attributes.

“The Chromebook 11 is the most affordable Chromebook on the market with LTE,” she wrote in an email.

The laptop costs $279 for Wi-Fi only. Best Buy lists a $349 price for the LTE model, which works with Verizon’s network and can cost less with certain upfront commitments for wireless service, the retailer said.

Verizon says a customer who has one of its Share Everything plans can add the Chromebook for $10 a month. And people who aren’t Verizon customers can buy prepaid data plans, the carrier says.

H-P also made a somewhat unusual choice for the product’s central processor. Chromebooks come in variants that use Intel x86 chips that evolved from PCs as well as others that use the ARM Holdings technology, the norm in smartphones and tablets.

For ARM processors, most mobile device makers have gravitated to offerings from Qualcomm, Nvidia and Texas Instruments. But H-P chose instead to use Samsung’s Exynos 5, a chip better known for use inside the South Korean company’s own devices.

“We select key technologies with a view on how to give customers the best product and computing experience,” the H-P spokeswoman said.

But Patrick Moorhead, an analyst with Moor Insights & Strategy, said the Samsung chip is not noted for technical superiority. “To me, H-P would have picked something like the Exynos based on price, not performance or battery life,” he said.