With the recent announcement of a multimode LTE chipset from Intel, it seems likely that Qualcomm and Intel will maintain their status as the top two cellular radio chipset suppliers in revenue terms as LTE continues to grow. However, the cellular chip supplier landscape is littered with the corpses of previously top-ranked companies, much of the destruction linked to the rise of 3G / W-CDMA over the past decade. Will history repeat itself, leading to the eventual demise of today’s top suppliers as LTE grows?
Motorola spun off its Semiconductor Products Sector in 2004 and named it Freescale Semiconductor partly as a result of 3G challenges. Philips spun off its Wireless business unit as NXP Semiconductors in 2006 after poor growth and weak profits. The transition to 3G nearly forced Infineon out of basebands until it acquired the Agere wireless chip unit of LSI in 2007 and executed a difficult turn-around that included nearly heroic efforts to develop compelling 3G chipsets and broaden its customer base. Infineon sold its Wireless business unit to Intel in early 2011. Texas Instruments, the leading baseband supplier through 2007 in unit terms and through 2009 in revenue terms, decided to withdraw from the market after limited success in 3G. Freescale made a similar decision in 2008, when the company started selling off cellular product lines and shortly after ceased development of new basebands. As old-guard suppliers struggled to make the transition to 3G, relative newcomer Qualcomm quietly rose to the top.
The transition to 4G, which is just now gathering momentum, has already hastened the demise of more suppliers. In 2009, STMicroelectronics, NXP Semiconductors and Ericsson Mobile Platforms joined forces to form ST-Ericsson. After failing to reverse falling sales and mounting losses, the remaining stake-holders Ericsson and STMicro decided to disband ST-Ericsson in mid-2013. After significant investment, the company had failed to gain any significant share in LTE against Qualcomm.
In Japan, NEC and others merged or closed their baseband businesses from 2003 to 2013. This year, LTE chip suppliers Fujitsu (transceivers) and Renesas (basebands and apps processors) failed to attain sufficient scale even in Japan, and decided to sell off or close their 4G chip businesses.
It is striking that the disruptive effects of 3G not only disturbed the market share rankings, but also seem to have completely destroyed the previous top players TI, Motorola/Freescale, and Philips / NXP / ST-E in cellular chipsets. These events were hastened by big changes in OEM market share as Apple and Google’s Android smartphones decimated Nokia, Motorola and Sony-Ericsson, destroying the cosy links among the previous top semiconductor providers and OEMs. At the same time, Japanese handset brands failed to regain share losses in Western Europe and North America to Samsung, LG and other S.E. Asian phone brands, pushing Japanese chipset supplier revenues down.
None of the smaller LTE players today seems to have the scale to match the smaller 3G players of five years ago, so where does this leave the future market, in the hands of just Qualcomm and Intel? Or, will Qualcomm and Intel fall victim to disruption as did suppliers in the past? The futures of even Broadcom and MediaTek remain uncertain given the problems previous big semiconductor players had with baseband development, and now consumers want cheaper phones enabled by basebands integrated with applications processors, RF transceivers and soon Wi-Fi, Bluetooth, GPS, FM and NFC, a tall order.
It does seem likely that a swing toward Chinese chip vendors Spreadtrum, Hisilicon, Leadcore and others will put greater pricing pressure on the top cellphone chip providers as LTE takes off, but all we can say with confidence is that the market, suppliers and technologies will probably take some surprising turns over the next ten years if the last ten years are any indication.
For more about Intel’s LTE chipsets and future wireless products, see Intel Significantly Bolsters Mobile Roadmap with Acquisitions and LTE Announcement, August 2013.