Broadcom continues to show healthy growth in basebands despite having only two primary customers who account for almost hundred percent of Broadcom’s baseband shipments. Broadcom currently draws its baseband growth from GSM/GPRS/EDGE basebands and we estimate that 3G basebands accounted for less than 10 percent of Broadcom's total baseband unit shipments in Q1 2011. By our estimates, Broadcom’s baseband unit shipment share reached 5.4 percent in Q1 2011 and provisionally we estimate that the company's baseband unit share could cross double-digits in 2012 with improved product-mix.
Broadcom’s ‘slow but steady’ approach is paying off nicely and the company is gradually solidifying its position in the baseband market. Unlike many other baseband companies, Broadcom seems to have the luxury to build its baseband market position, given its strength in non-baseband wireless products such as connectivity. We believe that Broadcom is likely to wait until 2013 to address the high-end 4G LTE mobile devices market.
We believe it’s time for Broadcom to shift gears and apply more pressure on its competitors. It can take more market share in basebands as most baseband companies currently lack financial strength and are stuck in product transition.
With only single-digit baseband share, Broadcom has multiple growth opportunities ahead of it including:
- As a key supplier to Nokia’s Series 40 platform, Broadcom stands to gain much in future as Nokia ups its investment in the Series 40 platform to add new features such as Qt development and full touchscreen support. We think that the Series 40 platform is now more strategic to Nokia than it was before and over time that platform will evolve like a smartphone platform.
- With Texas Instruments exiting the baseband market by early 2013, 3G opportunities at Nokia will open up in 2012 and should improve Broadcom’s product-mix.
- Broadcom had less than 2 percent unit share in the smartphone applications processor market in Q1 2011, by our estimates. This is an area Broadcom needs to focus on and the company so far failed to capitalize on smartphone growth to build a strong position in the applications processor market. Broadcom has an integration strategy in place for applications processors and we believe Broadcom can compete for Qualcomm’s customer base as a secondary supplier.
- Obviously, the 4G LTE devices market is expected to be a good opportunity for every baseband vendor in the next few years and we think Broadcom has all the technology pieces to be a top player in this space.
We continue to believe that Broadcom is strongly positioned for growth in the next few years and has multiple growth opportunities ahead of it. If there is any one company that can challenge Qualcomm in future, we would say it’s Broadcom. Broadcom has all the technology pieces to be a top-tier player in basebands and applications processors and we think it’s high time for the company to flex its muscles to take market share aggressively.