Today NVIDIA announced its first baseband-integrated applications processor Tegra 4i, which is the first significant product from its acquisition of soft modem design firm Icera in 2011. We have analysed NVIDIA’s acquisition of Icera in a separate blog post. Also, Strategy Analytics analysed Icera’s soft modem technology in an in-depth report.

The Tegra 4i product, designed in 28 nm, integrates 2.3 GHz quad-core R4 ARM Cortex-A9 processor with a companion power saving core, 60 core GPU and, most importantly, Icera multi-mode LTE modem (optimised version of Icera i500 stand-alone LTE baseband) functionality. The 2.3GHz quad-core R4 Cortex-A9 was jointly designed by NVIDIA and ARM.  NVIDIA claims that the Tegra 4i’s core size is half the size of its nearest quad-core LTE competitor (Qualcomm Snapdragon 800).

The Tegra 4i supports FDD-LTE, TD-LTE and also legacy air interfaces HSPA+/TD-SCDMA/EDGE/GPRS/GSM. The product also supports VoLTE standard and is expected to appear in commercial devices in Q4 2013.

With Tegra 4i, NVIDIA will join the elite LTE-integrated applications processor club. So far Qualcomm is the only mobile chip company that is shipping LTE applications processors in volume. Qualcomm’s 28 nm-based LTE Snapdragon processor MSM8960 gained strong traction in 2012 and featured in multiple LTE smartphone flagships. ST-Ericsson (L8540 and L8580) and Renesas (MP6530) also announced LTE applications processors that are expected to be commercially available by Q4 2013. Samsung, GCT Semiconductor, Sequans, Altair Semiconductor, Intel, Broadcom, Spreadtrum and Marvell have all announced / shpping slim LTE modems but haven’t yet announced LTE applications processors. MediaTek is also expected to field its first LTE applications processor in 2013-14 time frame.

The Tegra 4i is a step in the right direction for NVIDIA to be a significant player in the mobile processor market. Based on our estimates, NVIDIA has less than 1 percent share in the baseband market and less than 2 percent share in the smartphone applications processor market. However, NVIDIA maintained its lead in the non-iPad tablet market with a one-third share in tablet applications processors in Q3 2012.

We’ve been saying for a while that baseband-integration is necessary to capture bigger volume in the smartphone applications processor market. Based on our estimates, baseband-integrated applications processors accounted for 62 percent of total smartphone applications processors shipped in Q3 2012. The Tegra 4i product increases NVIDIA’s addressable market and focusing on LTE certainly makes sense.  We estimate that LTE basebands showed fastest growth among all air interface technologies and accounted for 18 percent of total cellular baseband revenue in 2012, up from just 2 percent in 2011.

Today NVIDIA also announced its “Phoenix” reference platform, which is based on Tegra 4i. Smartphones based on this reference platform are expected to pack 5-inch 1080p displays with 8mm thicknesss profile. Strategy Analytics believes that the low-to-mid range market is currently driven by reference designs. Companies including Qualcomm, MediaTek, Spreadtrum, Intel and Broadcom are already active with reference design programmes in order to promote their chipset offerings. NVIDIA needs to fight these companies to build share.

Overall, we’re impressed with NVIDIA’s ability to bring a leading-edge LTE applications processor to the market while some baseband companies are still trying to bring out their first LTE slim modem. The Tegra 4i is definitely a step in the right direction and certainly increases NVIDIA’s addressable market and also provides some competition to LTE market leader Qualcomm.

Sravan.K Kundojjala

Qualcomm announced the acquisition of Atheros Communications today to strengthen its market presence in the non-handset markets and to unlock the value of its connectivity chip business. Atheros currently supplies WLAN, Bluetooth, GPS and other networking products to notebook and netbook markets. Qualcomm is currently the number one player in the cellular baseband market.

Here are our quick comments and impact on the competition,

• This acquisition will allow Qualcomm to enhance the value of its connectivity chip portfolio. Historically, Qualcomm was not a major player in the stand-alone connectivity IC market. Qualcomm successfully integrated GPS functionality into its basebands but couldn't repeat the same for WLAN, Bluetooth and FM.

• Atheros acquisition will allow Qualcomm to apply pressure on Broadcom which appears to have a broader wireless portfolio than Qualcomm including NFC (Near Field Communications). By our estimates, Broadcom ranked number two in the wireless semiconductor market (excluding memory) in Q3 2010 and is growing rapidly. Although Broadcom is a minor player in the cellular baseband market, the company is still ahead of many wireless companies in terms of wireless revenue, thanks to its connectivity business.

• Qualcomm's upcoming product, the MSM8960, integrates multi-mode LTE baseband modem, ARMv7-compliant dual applications processor cores, Adreno GPU and connectivity (WLAN, GPS, Bluetooth and FM). As far we know, this is the first cellular baseband product that integrates a variety of connectivity functions. We believe products like this could apply pressure on Broadcom's stand-alone connectivity chip business in future.

• This acquisition also increases pressure on Texas Instruments (TI). TI currently draws its wireless revenues from OMAP applications processors, connectivity chips and Nokia's custom basebands. TI is expected to complete its exit from the baseband market by 2012. The lack of baseband products could leave TI without any apparent synergies between its applications processors and connectivity chips and may force TI to divest its remaining wireless business.

Overall, we believe that this acquisition will allow Qualcomm to expand into adjacent markets and also apply more pressure on its key competitors. Qualcomm successfully executed integrating applications processors into its basebands and became the number one player and now the company is trying to further the success by integrating connectivity chips.

Sravan Kundojjala

Broadcom announced today that it will acquire privately held 4G chipset vendor Beceem Communications for $316 million. Beceem, founded in 2003, is the leading provider of WiMAX basebands and RF chips for portable and handheld WiMAX devices. The company also supplies WiMAX radio chipsets for gateways, routers and other fixed WiMAX customer premise equipment. Recently Beceem started to shift its emphasis to LTE with the announcement of its BCSM500 baseband, which will support both LTE and WiMAX. Broadcom so far hasn't announced its LTE plans publicly, and this acquisition signals that the company is looking to the future in the wake of growing competition and consolidation in the cellular baseband supplier base. Broadcom acquired GSM/GPRS/EDGE and W-CDMA technology through acquisitions, and these are now paying off, so it appears that Broadcom is repeating this strategy for LTE.

Beceem supplies basebands for all of the WiMAX USB dongles and data cards sold by Clearwire, the largest WiMAX operators in terms of subscribers. Beceem generated $43.7 million in revenue in 2009 with net loss of $17 million, but with shipments surpassing 1 million chips per quarter in Q3 '09 and sales having tripled since 2008, the company appeared headed for profitability by late 2010. Buoyed by this success, Beceem filed for an IPO initially thought to be worth more than $100 million in April '10. This would have made a nice down-payment to investors, which include Intel Capital, DoCoMo Capital, Samsung Venture Investment and NEC. Investment by all VCs in Beceem totals close to $200 million to date.

By August 2010, announcements of support for LTE by operators around the world made it clear that Beceem faced a weakening, or at best slower growth WiMAX market, cutting the value of its proposed IPO. With its new LTE-WiMAX baseband, Beceem could benefit from the launch of LTE by Verizon Wireless, AT&T Mobility, and MetroPCS in North America, however, Beceem will not ship samples of its WiMAX-LTE baseband before Q1 ’11. After shipping its first samples and getting them designed into products, Beceem would still have to go through interoperability testing (IOT) with infrastructure vendors and demonstrate support for FDD and TDD in multiple channel bandwidths. The IOT process could take 18 months or longer, pushing LTE chip production out to mid-2012 or later for Beceem. In light of this, investors evidently saw risks in continuing to support Beceem, and decided to take Broadcom’s offer.

From Broadcom's perspective, the acquisition will allow Broadcom to offer home gateway / router platforms that incorporate 4G, Wi-Fi, cable, DSL and / or fiber optics, which would allow multiple users in a household to share a single wired or wireless broadband connection, cutting the monthly price per user. Of even more potential significance, the acquisition will allow Broadcom to eventually expand into LTE mobile devices. Until then, Broadcom can draw on Beceem’s success in WiMAX USB dongles, PC data cards and handsets to help fund development of LTE chipsets.

It seems likely that merchant baseband suppliers Qualcomm, ST-Ericsson, Altair Semi, Icera, Renesas and Intel / Infineon will beat Broadcom to market in LTE, particularly in the rapidly growing “non-handset” (our term) segment of the mobile market consisting of USB dongles, PC data cards, M2M modules and related data-centric wireless modem devices. By our estimates, basebands for the non-handset mobile market accounted for about 12 percent of the total baseband market in revenue terms in 1H 2010. Currently Qualcomm, Icera, Infineon and ST-Ericsson have the leading market share in basebands for non-handsets, a market today dominated by 3G. An increasing proportion of future non-handset WWAN data modems will support LTE plus 3G, making LTE capability essential for firms to continue supplying basebands into this important segment. Note that compared to LTE + 3G, it appears that LTE + WiMAX mobile devices will at best represent a small niche market.

When Broadcom enters the LTE baseband market, we expect the company to offer chipsets with comprehensive support for legacy GSM air interfaces through W-CDMA / HSPA+, multi-mode / multi-band RF transceivers, plus optional Wi-Fi / Bluetooth / GPS, and optional ancillary chips for mobile TV and advanced video processing. Broadcom had only about 3.3 percent share of the cellular baseband market in unit terms in 1H 2010, but the company's market share in basebands is growing rapidly with design wins at top-tier OEMs.

Broadcom's acquisition of Beceem leaves other baseband start-ups Icera, Altair Semiconductor, Sequans and Wavesat as potential acquisition targets for established baseband / chipset vendors looking to expand into LTE. Of these start-ups, Altair Semiconductor, which sampled its first LTE baseband in September ’09, appears to be in the lead with LTE basebands now reaching early production status. Another firm to watch in LTE is Intel, which recently acquired WiMAX / LTE chipset start-up Comsys and announced its intention to acquire the cellular chipset product lines of Infineon. Intel Capital has a 20 percent stake in Beceem, so we can only speculate that Intel decided that acquiring Comsys and Infineon would offer better synergies and returns on investment given that Intel already ships WiMAX chipsets into the embedded laptop market.

Aside from LTE chipsets, Broadcom also has to solve is its smartphone applications processor challenges; by our estimates, Broadcom had no share in smartphone applications processors in 1H 2010. Broadcom scored design-wins in Nokia's Symbian^3 smartphones recently with its BCM2727 co-processor, but we believe that Broadcom has to integrate BCM2727 functionality into its basebands to score significant smartphone design-wins in the future.

Last week we published our cellular baseband market share estimates for 1H 2010. By our estimates, cellular baseband unit shipments grew 23 percent and revenues grew 15.5 percent from 1H 2009 to 1H 2010. The non-handset segment, which includes PC data cards, PNDs, netbooks, tablets wireless USB dongles and M2M, accounted for 12 percent of total baseband revenues in 1H 2010 and grew faster than the handset baseband market.

Here are some highlights of our cellular baseband market share estimates:

• Qualcomm continued its revenue share lead with 39.6 percent share in 1H 2010. Qualcomm ranked number one in CDMA and W-CDMA baseband markets. We believe much of the Qualcomm's growth came from smartphones and non-handsets in 1H 2010.

• MediaTek ranked number two in revenue share behind Qualcomm with 16.3 percent share in 1H 2010. Contrary to popular perception, MediaTek currently doesn't compete head-to-head with Qualcomm and only recently launched its first W-CDMA baseband. By our estimates MediaTek had less than 1 percent W-CDMA share in 1H 2010 but the company ranked number one in GSM/GPRS/EDGE (GGE) and TD-SCDMA baseband markets in revenue terms. MediaTek’s baseband shipments to grey handset OEMs showed signs of decline in 1H 2010 in the wake of government-led crackdowns in India and China.

• ST-Ericsson finally showed signs of recovery in 1H 2010 after a difficult 2009 with its improved and rationalized product line up for GGE, TD-SCDMA, W-CDMA and LTE markets. However, the company has to shift its focus to its stagnant W-CDMA market share to compete against Qualcomm and Infineon.

• Infineon continued to gain share in GGE and W-CDMA markets with the help of its top-tier handset OEM relationships. By our estimates Infineon is emerging as a strong competitor to Qualcomm in the non-handset market also with 9 percent unit shipment share in the non-handset segment of the W-CDMA market. Infineon is expected to improve its non-handset baseband share further once Intel completes its acquisition in 2011. Texas Instruments' exit from the baseband market creating opportunities for Infineon and Broadcom at Nokia.

• Broadcom's baseband revenue grew 245 percent in 1H 2010 compared to same period the year before thanks to its design-wins at Nokia and Samsung. By our estimates W-CDMA revenues accounted for 17 percent of Broadcom's total baseband revenues in 1H 2010 and the company continued to improve its product-mix.

• Spreadtrum, Marvell, Icera, and Via Telecom also made progress in 1H 2010. Renesas' baseband revenues were down slightly but the company is expected to emerge as strong player by 2012 with LTE chipset design-wins at Nokia.

Looking forward, we believe that the non-handset market and new radio technologies (HSPA+, LTE and TD-SCDMA) to create growth opportunities for baseband vendors.

Consolidation in the baseband market continued with Intel acquiring Infineon's wireless business on Monday for $1.4 billion. Infineon's takeover is the fourth high-profile announcement in the last two years. Previously NXP, Freescale and Texas Instruments announced their exits from the merchant baseband market. This signals that the entry barrier is now too high for new entrants and raises pressure on smaller players such as Marvell, Spreadtrum and Icera. Intel's acquisition of Infineon's wireless business leaves Qualcomm, MediaTek, ST-Ericsson, Intel, Broadcom and Renesas as long-term players in the cellular baseband market.

We analyzed this back in May when the original rumour of the Intel/Infineon wireless deal surfaced. Infineon's wireless business is definitely an attractive target for Intel as it gives immediate access to valuable IP and an established customer base. Infineon is a rising star in the W-CDMA baseband market and ranked number two in the W-CDMA baseband market behind Qualcomm (excluding Texas Instruments’ custom baseband business with Nokia). Infineon has so far focused on slim modems and has stayed away from developing ARM-based applications processors. So far Infineon’s niche strategy has paid off, but the time has come for the company to expand its portfolio by offering a wider range of processors to address smartphones, tablets and other connected consumer devices. Although 3G and smartphones are of most interest to Intel, the company is likely to keep Infineon’s 2G business as it provides scale which is crucial to play in the cellular baseband segment.

It will be another year or two before Intel's applications processors are smartphone-ready. Meanwhile, in the next 12 - 18 months Intel can bundle Infineon's 3G platform with all of its notebook and netbook chipsets and gain significant 3G share to undercut Qualcomm and ST-Ericsson's non-handset offerings. But both Qualcomm and ST-Ericsson appear to have a two year technology lead over Infineon in chipsets for HSPA+ and LTE; Infineon is expected to introduce its first HSPA+ chipset in 2011 and an LTE chipset in 2012. MediaTek’s grey handset chip business may come under pressure from Infineon in the future if Intel expands its field application engineering force in China. Likewise, Broadcom is expected to come under pressure from this deal but should survive with help from its other businesses such as connectivity and digital home. This acquisition will also likely affect stand-alone application processor vendors such as Texas Instruments and NVIDIA that currently lack their own 3G / 4G modems. But we believe that it will take another 4-5 years for Intel to integrate basebands into its Atom CPU, if at all.

Infineon's acquisition still doesn’t guarantee Intel's success in the wireless handset market and the company's ultimate success in this market hinges on how soon Intel can come up with power-efficient processors that can stand-up and compete against a host of ARM-based processor vendors. On a positive note, Intel appears to be moving ahead of its other chip competitors in the software area which positions it well against ARM-based processor vendors. The company’s strong software expertise could help it to gain some OEM mindshare. Intel’s uninspiring track record in the wireless market during the last decade suggests that the company has to execute flawlessly this time to make it successful and keep Infineon’s wireless business as independent as possible. Clients can read our eight page analysis of the Intel/Infineon deal here.

MediaTek today signed an agreement with NTT docomo to license the latter’s LTE IP. MediaTek is a significant player in the WiMax baseband market but currently lacks an LTE roadmap. The company clearly has challenges in addressing the higher-end market, but in the last year alone it has made three important moves to strengthen its position: Firstly, the company licensed W-CDMA IP from Qualcomm in 2009; secondly, the company joined the Symbian Foundation, Open Handset Alliance and also partnered with Microsoft to improve its smartphone position; and thirdly, the company is now making a move to secure its position in the LTE chipset market. We expect the LTE terminal chipset market to be highly competitive with incumbents and startups all fighting for share.

MediaTek is currently second only to Qualcomm in the cellular baseband processor market but the company could easily cede its position without significant improvements in the 3G / 4G, smartphones, tier-1 vendors and tablet areas. As we noted in a previous report, MediaTek clearly has to develop products to address tier-1 handset OEMs, smartphones, and UMTS phones. Based on our estimates, MediaTek had less than 1% share in smartphones for its integrated processors in 2009. The company currently lacks stand-alone application processor products and its current line up of integrated processors is only good enough to address entry-level smartphones. We believe that MediaTek may have to go for an acquisition to strengthen its 3G / 4G modem IP and CPU design expertise to attack the high-end smartphone and tablet markets. Without design-wins at tier-1 handset vendors it would prove difficult for MediaTek to grow its market share in these segments.

Today’s announcement is further indication that MediaTek is not prepared to rest on its strong position in the GSM/GPRS/EDGE baseband market, but is looking for long term (evolution) strategies to gain market share in future growth areas.

- Sravan Kundojjala

P.S. This announcement is in contrast to the Japanese chip vendor Renesas which partnered with Nokia to develop LTE IP recently. Previously, Renesas licensed W-CDMA IP from NTT docomo to design its basebands.

Nokia announced today that Renesas will acquire its wireless modem technologies business for $200 million and the transaction is expected to close before the end of 2010. Renesas has offered GSM PAs and transceivers for the mainstream GSM market for more than a decade but lacked basebands. More recently, Renesas entered the baseband market with W-CDMA basebands for Japan and plans to provide complete chipsets and PAs for the global market. Renesas merged with NEC Electronics in April 2010 and most recently joined the Symbian Foundation.

Previously Nokia transferred its 3G IC design operations to ST-Ericsson, licensed its W-CDMA/HSPA modem technology to Intel and collaborated with Infineon for LTE RF transceivers development. This announcement raises a question whether Nokia will continue to own the IP and earn royalties for legacy basebands, GSM through W-CDMA / HSPA+?

This is a significant development considering Renesas' lack of baseband design-wins outside Japan. Strategy Analytics estimates that Renesas and NEC Electronics cumulatively held just 1.3 percent of the baseband market (in revenue terms) in 2009. Renesas originally licensed baseband technology from Japanese network operator NTT docomo to produce the SH-Mobile G series baseband processors, which also integrate Renesas' application processing technology. Most recently Renesas sampled a fourth generation of SH-Mobile G baseband processors, the SH-G4, which supports the HSPA air interface.

This partnership with Nokia provides Renesas with three different sources for fundamental 3G modem IP, NTT docomo, NEC Electronics and Nokia. This situation is similar to ST-Ericsson's, which also has three different 3G modem IP sources, EMP, NXP and Nokia. It appears that Renesas will use Nokia's 3G modem technology to compete for design-wins outside Japan. The combined entity of Renesas and NEC Electronics now boasts Fujitsu, Sharp, NEC, Sony Ericsson and Panasonic as its baseband customers . Renesas' expansion into the global baseband market would increase competition in the marketplace.

This move comes at a time when the 3G market is growing, accounting for close to one third of global cellular baseband revenues in 2009. Nokia's existing 3G chipset suppliers include Texas Instruments, Qualcomm, Broadcom, ST-Ericsson and Icera. It is worth noting that the first Nokia 3G phones based on Qualcomm, Broadcom and ST-Ericsson's basebands are expected to debut in late 2010 or early 2011. Infineon is noticeably absent in this list although Infineon is a key GSM/GPRS/EDGE baseband supplier to Nokia.

We don't expect the first products based on this partnership to debut until late 2012, the time when Texas Instruments completes its baseband exit. In 2013 Nokia's 3G chipset suppliers list would include Qualcomm, ST-Ericsson, Broadcom, Icera, Renesas and potentially Infineon and Intel. While Nokia can afford to have multiple suppliers considering its scale we could see some further acquisitions and mergers among these baseband suppliers.

Today’s announcement is likely to affect several companies...

• ST-Ericsson: ST-E will probably be worst hit by this announcement as it brings into doubt the strong relationship ST-E has had with Nokia over the past 3 years. ST-E has spent the last couple of years consolidating the 3G technologies it acquired from EMP and NXP with Nokia's 3G IP into its flagship processor the U8500 which is expected to appear in handsets at the end of 2010. Nokia will obviously be working with Renesas in future HSPA/LTE projects, thus potentially diluting the relationship with ST-E.

• Qualcomm: Qualcomm has enjoyed a much more positive relationship with Nokia during 2009/2010 since the companies resolved their long-standing IPR legal battles. Qualcomm is expected to supply chipsets to Nokia for its upcoming W-CDMA/LTE products. Nokia's stronger relationship with Renesas may now affect that.

• Infineon: Why did Nokia not choose Infineon? Nokia and Infineon already have a close relationship around LTE RF transceivers, but Nokia may have considered Infineon's expertise in HSPA and LTE modems to be too weak.

• NTT docomo: Renesas currently licenses 3G modem IP from NTT docomo for use in its SH-Mobile G processors which are desgined into handsets from Sharp and Fujitsu. Renesas' strong relationship with Nokia now makes it more likely that Renesas will use NTT docomo's IP for products aimed at the Japanese market, and will employ Nokia's HSPA/LTE IP in new chipsets for us in Nokia handsets. It will also allow Renesas to expand its client base beyond Japanese waters.

We have just finished up our Q4 2009 update to our baseband market share model. This gives us full year 2009 market share as well. It's the combined work of myself, Chris Taylor and Stuart Robinson with support from our wireless service colleagues. Cellular baseband market revenues reached $11.04 billion in 2009, down about 0.7% from 2008. In 2009, the cellular baseband market faced ASP challenges due to the global economic recession and increased competition in the market.

Here are some highlights based on the data from Strategy Analytics Baseband Quarterly Metrics service module:

* Qualcomm led the the market with close to 40% share of total global baseband revenues in 2009. Qualcomm improved its revenue share in both the CDMA and W-CDMA markets.

* Despite being absent in the important W-CDMA market, MediaTek managed second position in terms of baseband revenue share in 2009. Strategy Analytics estimates that the W-CDMA market represented close to one third of total cellular baseband revenues in 2009. MediaTek is expected to take a minor W-CDMA share in 2010 with its new W-CDMA baseband processor, MT6268.

* ST-Ericsson had a difficult year in 2009 as the company continued to restructure its product lines and also lost share at its important tier-1 handset OEM customers. TD-SCDMA was the only bright spot for ST-Ericsson.

* Both Infineon and Broadcom benefitted from multi-sourcing strategies at tier-1 handset OEMs which significantly improved their baseband revenues in 2009. Both companies are expected to make further gains in 2010 by expanding at their respective customers.

* Marvell had just 1.4% share of baseband revenues in 2009 but is expected to play an important role in the Chinese TD-SCDMA baseband market with its highly integrated TD-SCDMA baseband processor, Pantheon 920.

Strategy Analytics provisionally estimates that total global cellular baseband revenues reached $2.8 billion in Q1 2010. Looking forward to the end of 2010, new radio technologies (LTE, TD-SCDMA), multi-sourcing strategies and mobile broadband will provide growth opportunities for baseband processor vendors.

- Sravan Kundojjala

Intel is said to be in talks with Infineon to buy latter's wireless chip business unit. Of course this not the first time we heard about Infineon's wireless chip division rumors. Previously Samsung, NXP and ST Micro were also reported as potential buyers of Infineon's wireless chip business.

Previously Intel invested in the wireless handset chip business but divested it to Marvell. That time Intel was more focused on the application processor and was less focused on the baseband processor. So what's changed? Strategy Analytics believes that the growth in the mobile broadband is a key factor and Intel definitely needs a modem know-how to participate in this market. Intel is a key player in the WiMax market but lacks 3G and LTE baseband technology. Currently the company ships 3rd party modems in its Atom chipsets but in the long-term it would be beneficial to own modem technology to integrate it in its future Atom CPUs. Last year Intel acquired Freescale's France-based wireless operations and also licensed 3G / HSPA modem technology from Nokia.

Strategy Analytics believes that Infineon could be a good partner to companies looking for RF expertise and baseband customer relationships. Infineon's wireless business looks well settled after the company divested its Qimonda stake.

Here are some quick facts about Infineon's wireless business based on Strategy Analytics data.

* Infineon's wireless chip revenues represented close to 30% of its total revenues in calendar year 2009 and 25 percent in Q1-2010.

* Infineon's wireless chip products include basebands, RF transceivers, power management ICs, connectivity ICs (Bluetooth, GPS, and WLAN) and platform solutions.

* Infineon's baseband revenues represented close to 53% of its wireless chip revenues in 2009. * The company has baseband / RF customer relationships with almost all of the top-10 handset OEMs.

* Infineon ranked fourth with 11% unit shipment share in the $11.0 billion cellular baseband market in 2009.

* Infineon's wireless business has been profitable for the last four consecutive quarters. The company had just 2.5% operating margin in its wireless business in 2009.

* Despite its impressive baseband and RF product portfolio, the company currently lacks stand-alone application processors. It remains to be seen whether Infineon will go it alone or partner with Intel. We believe that it would cost $3-$5 billion for Intel to acquire Infineon's wireless business.

- Sravan Kundojjala

The handset chip market has gone through some rapid changes over the past 3 years and only a handful of the remaining players have long-term viability and sustainable profitability. We estimate that the total cellular baseband revenues in 2008 were $11.15 billion and $11.04 billion in 2009 (provisional).

Some of the highlights of Strategy Analytics' Quarterly Baseband Share Tracker for Q3 2009,

* Qualcomm was the market leader with 38 % revenue share and 19 % unit share;

* MediaTek was second only to Qualcomm in terms of unit and revenue share;

* Broadcom and Infineon are improving market share and expanding at their respective key customers. We estimate Broadcom's cellular baseband revenues grew 350 % in 2009. However, Broadcom is still a minor player in the cellular baseband market but is expected to be an important player in 2010;

* ST-Ericsson ranked fourth with close to 10 % baseband revenue market share;

* Texas Instruments' baseband revenues were down almost 33 % on a Y-o-Y basis in Q3 2009.

With Texas Instruments and Freescale exiting from the cellular baseband market, Strategy Analytics believes that Qualcomm, ST-Ericsson, MediaTek, Infineon and Broadcom are well positioned to remain long-term players. However, new entrants are likely to appear as demand increases for LTE and TD-SCDMA chips.

- Sravan Kundojjala