http://www.sharetechnote.com/html/Handbook_LTE_PCI.

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As the terminology implies, Physical Cell ID is an indentification of a cell at physical layer. It
has similar role as Primary Scrambling Code of UMTS cell.
This physical cell ID is determined by Primary Sync Signal and Secondary Sync Signal as
described below.



Refer to Cell ID Detection ans System Information Detection to know specifically how this
physical cell is used in the process of initial cell detection.

Note 1: There are another type of cell ID which is carried by
SIB1(systeminformationBlockType1.cellAccessRelatedInfo .cellIdentity). When we say just
'Cell ID', it normally refers to the cell ID carried by SIB1 but many people (including myself
-:) get confused with 'cell id' and 'physical cell id'.
Physical Cell ID is mainly used by UE to decode physical layer data being transmitted by
eNodeB. Cell ID in SIB1 is designed for eNodeB management within the core network, but
this one is also used for UE to identify a specific cell in terms of RRC/NAS layer processing.

Note 2 : Relationship between Physical Cell ID and Cell Specific Reference Signal
The resource element locations for Cell Specific Reference signal is influenced by Physical
Cell ID(see Reference Signal - Downlink for details). In case all other variables are the
same, there can be conditions where the resource element for the reference signal is same
even when the physical cell ID is different if any two Physical Cell IDs (let's call them PCI1
and PCI2) meets the following condition.

PCI1 mod 6 == PCI2 mod 6

If these values are same and the reference signal from two cells may interfere each other
and UE would have difficulties detecting cell.
It means that you should be carefull when you are allocating Physical Cell IDs in eNodeB
deployment or when you assign physical cell IDs for multiple cells on Network Simulator (UE
test equipment).