The recent agreement between Nokia and Qualcomm Inc. to collaborate on the development of advanced UMTS mobile devices is likely to solidify Qualcomm’s lead in the global market for mobile-handset semiconductors, according to iSuppli Corp. The initial development will be of devices for the North American market. The companies will use Qualcomm’s 3G Mobile Station Modem MSM7xxx-series and MSM8xxx-series chipsets, which provide processing and mobile broadband capabilities.

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In the fourth quarter, according to iSuppli’s preliminary estimate, Qualcomm accounted for 40.6% of worldwide revenue from shipments of mobile handset baseband semiconductors, up from 36.3% in the third quarter. The company expanded its lead over the number two supplier, Texas Instruments, to 20.9 percentage points, up from 14.1 points in the third quarter.

“Until now, Nokia and Qualcomm have had frosty relations as they battled over intellectual property rights and royalty payments related to 3G technology. Furthermore, Nokia has used custom 3G silicon from ASIC powerhouses STMicroelectronics and Texas Instruments,” said Francis Sideco, senior analyst, wireless communications, for iSuppli.

“However, with 3G technology maturing, there is less differentiation to be had from custom ASIC solutions, making Qualcomm’s standard silicon more attractive as it allows Nokia to focus on enhancing handset designs and service offerings to improve the consumer experience,” Sideco added. “This can only be considered a positive development for Qualcomm’s position in mobile handset baseband semiconductors and another challenge to overcome for its competitors.”