Nokia announced today that it will adopt Microsoft's Windows Phone as its main strategy for smartphones, embracing Microsoft's developer ecosystem to drive its future smartphone growth. This is a significant announcement that changes the market dynamics dramatically and accelerates the horizontalisation in the mobile software platforms. Google's Android significantly contributed to the horizontalisation and now Nokia's partnership with Microsoft creates another credible choice. We have assessed Microsoft's mobile strategy back in March 2010 and it still holds true. We mentioned this Nokia partnership possibility in that report!

However, several questions remain like how Nokia will monetise its investments in MeeGo, Qt, Symbian, Ovi and Web Runtime and the availability of first Nokia Windows Phones. As for chipset vendors, last week we wrote that Qualcomm could be a prime beneficiary from this deal. We believe Nokia will add Qualcomm, Broadcom, ST-Ericsson, Renesas and Intel to its Windows Phone supplier list. We will know more on these questions as it unfolds today.

Nokia announced yesterday that the Symbian Foundation will morph its role from an operational entity to an IP and trademark licensing entity. This news should not affect Symbian's future. After all, Nokia paid EUR 260 million to acquire Symbian to save royalty fees. This news along with Nokia's previous announcement about the Symbian platform iterations clearly suggests one thing; Nokia appears to be not interested in highlighting Symbian as a consumer-facing brand unlike Google's Android. Not talking about Symbian could also save PR nightmares for Nokia. Whether Symbian is developed by an independent entity or within Nokia is ultimately irrelevant. What is more important is how Nokia maintains support from the developer community. If it fails to inspire developers then the platform will lose mind share among users and lose market share in the smartphone market.

From now onwards Qt will take the central role in Nokia's software strategy and Nokia may stop talking about Symbian altogether in future. It remains to be seen whether Nokia will apply this to its other platform, MeeGo. In future Nokia may deploy Qt even on its Series 40 platform and may call every Qt-enabled phone as a smartphone.

On paper Nokia appears to have a clean software strategy with Qt but so far we haven't seen any tangible evidence of it. Previously we expressed concerns with Nokia's speed of execution with Qt and it looks like we will have to wait until 2011 to see the real evidence of this software strategy. We also note that Nokia is the only vertical vendor who is open sourcing its proprietary platforms.

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.

Hear insights from Stuart Robinson, Director of Strategy Analytics’ SpecTRAX service, who will talk about the important trends in recent global cellular handset model announcements. Join us on Thursday 9th September for a complimentary live online webinar.

Topics covered by the webinar include:

• OS penetration; how many phones feature Android compared to LiMo, Windows and Symbian?
• Analysis of current spec trends; Bluetooth, touchscreen, QWERTY, form factor, screen & camera resolution….
• Shelf share analysis by region; which carriers offer the most Android phones?
• Typical specs of Android phone vs handsets running other operating systems

The webinar is targeted at existing clients of the SpecTRAX service as well as product planners, product marketers and portfolio managers across the industry.

Attendance to the webinar is free however pre-registration is required. REGISTER –>>>           

Date:                 Thursday 9th September 2010           

Duration:           30 minutes, followed by 15 minutes Q&A           

Time:                  2pm BST UK / 9am EDT Boston, repeated at 5pm PDT LA

Once we have processed your registration, you will receive a confirmation email message with instructions on how to join the event. Feel free to forward this message to your colleagues who may be interested in this webinar.

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.

The number of mobile operating systems just keeps getting bigger and to our count close to ten platforms are now competing in this space. They include Symbian, Android, iPhone OS, BlackBerry OS, WebOS, MeeGo, bada, Windows Mobile, LiMo Foundation-compliant platforms, Brew Mobile Platform and Linux variants. The question that obviously comes to everyone's mind is who will win in this mobile software platform market.

There are some interesting angles to think about this.

• Can the smartphone market size accommodate this many platforms?

• Do consumers care about operating systems?

• Is it a zero-sum game or can there be a more than one winner?

• Everyone is talking about carriers becoming dumb pipes but what about handset OEMs? Will Google and Microsoft make handset OEMs as dumb pipes or add value?

• Should every handset vendor build their own OS? Can they cope with incremental mobile OS R&D costs?

• Can horizontal and vertical business models co-exist in the mobile industry?

• Is there enough developer support to address every OS?

• How many platforms operators can support?

We think R&D capabilities, scale, brand, and strong partner and developer ecosystem are necessary ingredients to sustain a long-term smartphone OS and only few of the above mentioned platforms check most of the boxes. Strategy Analytics estimates that smartphone OS vendors currently spend close to $100-$200 million on R&D on average and this is expected to grow incrementally.

Nokia (Symbian and MeeGo): 2010 will be remembered as a software transition year for Nokia and 2011 will see a settled software platform strategy with both Symbian and MeeGo (Maemo) getting much waited Qt UI and app frameworks. Nokia has a unique software strategy and is the only vertical vendor who is open sourcing its proprietary platforms. Nokia already has scale, brand, and R&D capabilities and if the company can excite the developer community and consumers with Qt then it should keep its smartphone lead for a long time to come. Nokia is well positioned to democratize the iPhone and BlackBerry experience to the masses. Nokia's software transition will be watched closely as competitors becoming stronger.

Microsoft: We believe Microsoft can not afford to lose in the mobile platform market given its synergistic importance to its other businesses and Windows Phone 7 Series (WP7 Series) announcement just reiterates that. It remains to be seen how WP7 Series platform will fare in terms of price points, hardware requirements, OEM support, developer and consumer reaction which can decide whether Microsoft can get the scale that is required to sustain a long-term smartphone OS. Microsoft will face a strong challenge from Google as both companies are targeting the same OEMs. Microsoft may position older Windows Mobile versions for low-end smartphone market but it remains to be seen how OEMs will react given more appealing nature of WP7 Series platform.

Android: Google and its partners executed very well so far and 2010 could be the Year of Android. Unlike Microsoft's WP7 Series platform, Android can also run on low-end chipsets which can increase its addressable market. Android and Symbian are the only mobile OSs that are targeting mass-market smartphone segment currently. This gives edge to Android to gain scale as handset OEMs push Android to feature phones. However some key risks like fragmentation and future Google moves that may cause friction to OEMs and operators will be watched closely. We also believe that the expanding size of the smartphone market should create enough opportunity for horizontal software platform players as Google and Microsoft currently lack high volume handset customers.

BlackBerry OS: RIM continued to gain with its market leading "Push" technology and security features. However, its web browsing and touch screen experience needs to be addressed. RIM already trying to fix the web browsing problem with new WebKit-based browser but touchscreens remain a challenge.

iPhone OS: Apple continues to win mindshare from developers and consumers alike and is well positioned to be a long-term player in the smartphone OS market. Apple's web browser is equally capable even if the trend shifts to web applications in the future. Apple may come under pressure from Android and resurgent Microsoft in the future but the growing size of the smartphone market should give enough room for iPhone OS to grow.

LiMo Foundation: Being a middleware platform and because of its governance structure, the LiMo Foundation currently lacks a direct relation with the developer community and currently depends on its operator partners for ecosystem. 52 LiMo-compliant handsets have been announced so far and 24 major global carriers are members of the Foundation. We believe that the LiMo Foundation's middleware platform is technically closer to Nokia's MeeGo and it remains to be seen how the Foundation will pursue its strategy given global OEMs are currently choosing Android.

Palm's WebOS: Despite seeming to have one of the best mobile platforms, Palm's limited geographical reach, and limited R&D budget could prevent the company from scaling as much as its competitors Nokia and Apple. Palm's lack of brand-awareness outside North America is not helping the matters. We believe Palm's lack of scale could hurt it in the future as its competitors become even stronger.

Samsung bada: Samsung bada's definition and market positioning remains still subjective given its kernel-configurable nature. It remains to be seen how Samsung's bada will keep pace with Android, iPhone OS, Symbian and others. Like Android and Symbian Samsung's bada also expected to target mass-market smartphones.

Qualcomm BREW Mobile Platform (BMP): We believe Qualcomm is positioning BREW as a low-end smartphone platform but it will face a stiff challenge from Android and Symbian as they are also trying to address the feature phone market. Qualcomm's BMP is also not supported by other chipset vendors but Qualcomm is expected to leverage its existing relations with operators and handset OEMs.

Despite the desire of OEMs to control their platforms, we continue to believe that the growing R&D costs to develop a smartphone OS and ecosystem around it could potentially force them to consolidate their efforts around licensable operating systems while also building OS-agnostic differentiating layers on top of that. Examples include Nokia (Qt / OVI), Motorola (Moto Blur), Sony Ericsson (UX), HTC (Sense UI), Samsung (TouchWiz) and LG (S-Class).

Renesas has been trying to improve its global reach with its SH-Mobile G Series of application processors. The fourth generation SH-Mobile G processor, SH-Mobile G4, will support HSPA and is expected to be available in 2010. Renesas' SH-Mobile G series processors (integrating the FOMA baseband technology of NTT docomo) support OSs such as Symbian and Linux and are ARM-compatible, unlike the company's stand-alone apps processors. While Renesas is a prominent supplier in markets for apps processors, RF transceivers and power amplifiers, it is only a minor player in the cellular baseband processor market. Renesas doesn’t have its own baseband technology and has collaborated with the NTT docomo to design the SH-Mobile G Series chips.

Competition in the global W-CDMA chipset market is already high and tier-1 handset vendors already have established relationships with other leading chip suppliers. If Renesas can attain any high volume tier-1 global vendor for its SH-Mobile G basebands it could definitely help its long-term ambitions. But so far there are no publicly known SH-Mobile G baseband design-wins outside Japan and Korea.

In April 2009 Renesas announced merger plans with Japanese chip vendor NEC Electronics. Unlike Renesas, NEC Electronics has its own baseband technology and it remains to be seen how Renesas will leverage NEC’s baseband expertise. The planned merger with NEC Electronics is not expected to contribute much to Renesas’ global baseband presence given that NEC Electronics is also focused on the Japanese market. To read more about our thoughts on Renesas, see our recent profile on the company here.

Sravan Kundojjala

At the London “official” launch of Samsung’s new mobile operating system, bada (which means ocean in Korean), many questions remain unanswered regarding what bada is all about.

bada’s goal is “smartphones for everyone”, everywhere in the world, starting with 50 countries when the first handset is launched sometime during the first half of 2010, but extending to global coverage eventually.

Samsung’s first handset based on the bada platform will also be the first phone to run Samsung’s TouchWiz 3.0 user interface. The company has a desire to deliver a rich user experience to everyone. Although Samsung declined to comment on its strategy for other OSs including Symbian, Android, LiMo and Windows Mobile, we believe that bada has come about as a result of Samsung’s frustration with the user interface capabilities (or lack of) of Symbian over the last couple of years, forcing the handset OEM to develop its own solution.

Samsung declined to estimate the number of shipments it expects to achieve with bada during 2010, but said it is currently working with mobile network operators to estimate the likely demand for its first handset.

Full details of the hardware requirements for bada were not discussed during the announcement, but Thomas Richter, Director of Portfolio Management at Samsung, confirmed that the platform will support 3D graphics, multi-touch capacitive touchscreens, Flash, C++, HTML5, multiple sensors and many other hardware and software functions. Application developers will have access to some of the core phone functions such as the proximity sensor, weather sensor and call functions. Richter added that there will be an extensive developer site and developer support centres around the world. In the same way that Google drummed up support for its Android platform, Samsung is launching a developer competition for bada, with total prize money of US$2.7 million and a first prize of $300K for the winner of the best application. Developer days will be held in Seoul, London and San Francisco to begin with during 2010.

Samsung said it expects to ship a total of 40 million touchscreen phones during 2009 and “many more” during 2010. Estimates from other sources suggest that around 50% of Samsung’s portfolio in 2010 will consist of touchscreen phones and that the company may ship over 100 million touchscreen handsets during 2010.

Stuart Robinson

Follow me on Twitter: @Stuart_Robinson

Qualcomm, Gold sponsor of the 2009 Symbian Exchange and Exposition, today announced a new subsidiary called QuIC (Qualcomm Innovation Center, Inc) to focus on optimizing open source software such as Android, Symbian and Chrome to its wireless chipsets. Qualcomm settled its legal disputes with Nokia last year and earlier this year Nokia awarded a 3G / 3.5G design-win to Qualcomm. Qualcomm agreed to port Symbian operating system to its MSM7000 and 8000 series chips and Nokia's handsets based on this partnership are expected to debut in 2010.

We believe that Qualcomm will play an important role in Nokia's high-end smartphone portfolio in the coming years as Nokia continues with its multi-vendor strategy for baseband suppliers.  Nokia's previous custom ASIC approach, primarily using Texas Instruments (TI), is gradually reducing and Broadcom, ST-Ericsson and Qualcomm will ramp up at Nokia to compensate for this. We expect Nokia to use Qualcomm and ST-Ericsson in the high-end portfolio while Infineon and Broadcom are expected to play a role in the low-end to mid-range portfolio. It is worth noting that with the exception of Infineon, the remaining three are all fabless semiconductor companies. This is in line with Nokia's strategy to adopt standard off-the-shelf ASSP solutions instead of custom ASICs. Earlier Texas Instruments didn't have a 3G baseband design of its own and acted like a foundry for Nokia's in-house designs.

Currently Qualcomm has a relatively weak position in the smartphone market primarily because it did not support the Symbian OS. However, the company's recent settlement with Nokia, its SnapDragon processors and multiple Android and Windows Mobile design-wins could potentially make it competitive in the smartphone market. We believe that initiatives such as QuIC could contribute positive results in improving Qualcomm's smartphone position.

Sravan Kundojjala