Cellular network technology transitions bring step changes to the baseband market and act as catalyst. Historically, 2G to 3G and 3G to 4G transitions brought significant growth to the baseband market. 5G transition appears to be no different. The 4G to 5G transition helped the baseband market to clock all-time high revenue in 2020, beating the COVID-19 pandemic-driven weakness.

Despite the pandemic, the US-China trade war and shortages, the global baseband market grew 25 percent to $26.8 billion in 2020, by Strategy Analytics estimates. A high mix of higher-priced 5G basebands boosted the average selling prices (ASP) and revenue. 5G baseband shipments grew more than 900 percent year-on-year in 2020.

Here are some highlights from our baseband research findings.

• Qualcomm, HiSilicon, MediaTek, Samsung LSI and Intel and captured the top-five cellular baseband revenue share spots in 2020.
• Qualcomm returned to shipment growth in 2020 after seeing two consecutive years of decline, driven by Apple iPhone 12 design-wins, primarily. Apple adopted Qualcomm's X55 5G slim modem for its iPhone 12 lineup. Qualcomm made a big splash in the 5G Android market with its X55 plus Snapdragon 865, 765, 768 and 750 platforms. All leading Android vendors, including Samsung, Xiaomi, Oppo, Vivo, Redmi, Realme, Meizu, OnePlus, Sharp, Nokia and others, released Qualcomm-based 5G devices. Despite the competition, Qualcomm ranked number one in both 4G and 5G markets. The company will continue this momentum in 2021 with a full year iPhone impact, new design-wins at Honor, Huawei competitors' gains, non-handsets and favourable post-COVID market outlook.
• HiSilicon, the number two 5G baseband player, saw its shipments decline, thanks to U.S. sanctions. HiSilicon's baseband shipments fell more than 30 percent year-on-year in 2020. HiSilicon's share will drop inevitably in 2021 and we expect Qualcomm, MediaTek and Samsung LSI to capture HiSilicon's baseband share. It remains to be seen whether Huawei will consider the sale of HiSilicon's assets to a third party firm.
• MediaTek's baseband revenue surged in 2020, driven by 4G and 5G share gains. MediaTek's Dimensity 5G SoC family of chips gained solid traction in the Chinese 5G market. MediaTek is on a path to establish itself as the number two 5G supplier in 2021. Like Qualcomm, MediaTek is also trying to capture growth in the non-handset 5G markets with its T700 and T750 slim modems. MediaTek will enter the mmWave 5G market in 2022 with its Helio M80 in time for the China Winter Olympics event. Strategy Analytics believes that MediaTek should not repeat its 4G mistakes, which resulted in rapid price and margin erosion. MediaTek should focus on its 5G chip cost structure, especially in mmWave 5G markets.
• Samsung LSI saw its 5G shipments grew more than 450 percent in 2020. However, Samsung LSI's in-house customer Samsung Mobile faced challenges in 2020, limiting its growth. Strategy Analytics feels that Samsung LSI should utilise its potential to be a merchant cellular vendor. Samsung LSI has had success with its Vivo 5G cellular chip relationship in 2020. We think the company can go after Qualcomm and MediaTek with its strong cellular chip lineup.
• Unisoc ranked number one in both 2G and 3G markets in 2020. Even in 4G, Unisoc showed signs of recovery after a long time. Unisoc's latest Tiger-branded 4G chips Ivy-branded 5G chips look competitive. We think Unisoc has a huge opportunity to address longtail 4G market in emerging markets. Unisoc's latest 6 nm-based T7520 5G SoC will contribute positively in 2021.
• Apple, which acquired Intel's smartphone modem business in 2019, will enter the baseband market in the next two years. We expect Apple to develop a range of 5G products, including 5G-integrated A-series apps processors and slim modems, to address various use cases. Apple has enough scale to sustain its cellular investments.
• Smaller baseband vendors Altair Semiconductor, Nordic Semiconductor and Sequans, saw good traction for their cellular IoT chips in 2020.

Despite all-time high revenue in 2020, the baseband market faces multiple challenges.

• How will on-going shortages affect the baseband market growth in 2021? 4G chip shortage affected baseband vendors in recent quarters. Increasing 5G demand and Samsung's Austin fab closure due to snowstorm could exacerbate shortages in 2021.
• How can baseband vendors stay competitive with increasing contribution from mid-range 5G chips, which command a relatively lower price? Which baseband company has the best cost structure to take advantage of the growth in the 5G? Strategy Analytics feels that baseband vendors should stay away from price wars and focus on growth opportunities brought by 5G. We think the 5G market is still in the early stages and that Release 16 and Release 17 will open up new opportunities.
• How can baseband vendors expand beyond smartphones? Qualcomm, for example, is investing in RF front-end (RFFE), IoT, Windows PCs, XR, automotive and EDGE AI to intercept new opportunities triggered by 5G growth. The company had over $3 bn RFFE revenue in CY2020, fast approaching market leaders Qorvo and Skyworks. We expect baseband vendors to complement their 5G offerings with mergers and acquisitions in the coming years to capitalise on new opportunities offered by 5G.

Strategy Analytics has been tracking the cellular baseband market for a long time and has a wealth of data and analysis to support the industry ecosystem with our data-driven actionable insights. Please let us know how we can help you.

Sravan Kundojjala (@Skundojjala)