Top cell phone maker Nokia will use Qualcomm's chips in its advanced cell phones, the firms said on Tuesday, marking a further warming of ties between the former courtroom rivals.

The cooperation gives Qualcomm access to a major share of the smartphone market, while it enables Nokia to further lower production costs.

In the end of the day Qualcomm needs Nokia as much as Nokia needs Qualcomm, said Gartner analyst Carolina Milanesi.

The deal marks the first time Nokia will use Qualcomm chipsets in its 3G phones, and brings the firms closer together after years of bitter disputes over intellectual property rights and royalty payments.

We are very excited about this opportunity, Andrew Gilbert, the head of Qualcomm's European business told Reuters in an interview. We are going to compete for as much of their business as we can.

Nokia's key suppliers of 3G chipsets have been Texas Instruments and STMicro, which has spun off wireless chips into a joint venture with Ericsson.

Nokia and the new ST-Ericsson venture said on Tuesday they would cooperate on providing ST-Ericsson's U8500 chips for 3G smartphones using Symbian foundation software.

Nokia said on Tuesday it had tapped also Broadcom, its current supplier of second-generation technology chips, to supply 3G chipsets.


Nokia and Qualcomm agreed last July to a 15-year settlement that included a hefty 1.7 billion euro one-time payment from Nokia, ending a three-year legal battle where the firms raised dozens of cases against each other on three continents.

The agreement also comes against the backdrop of an ailing cell phone market, with 2009 sales set to drop as consumers rein in spending on new gadgets due to the economic recession.

Nokia said it would introduce the first model using Qualcomm chipset and Nokia's software in the middle of next year.

The phones would initially be for the North American market and work on third-generation networks and run on the Symbian operating system, the most widely-used smartphone software that is currently controlled by Nokia but will eventually be made royalty-free for all users.

Nokia shares were down 2.2 percent at 9.11 euros on a weaker Dow Jones Stoxx European Technology Index.

I don't see the markets reacting since the products are expected to be sold only around mid-2010, said Nordea analyst Martti Larjo. (But) at least the cooperation shows that Nokia is focusing its efforts on the North American market.

Nokia has long struggled in the U.S. market. North American sales dropped 20 percent year-on-year in the fourth quarter, and Nokia's North American market share of some 8.7 percent was well below its global figure of 37 percent.

(Reporting by Tarmo Virki in Barcelona and Eva Lamppu in Helsinki; Editing by Hans Peters)