Strategy Analytics Exclusive Presentations at MWC 2013

Strategy Analytics Exclusive Presentations at MWC 2013
	Strategy Analytics is delighted to announce that we will again be hosting our exclusive breakfast presentations at Mobile World Congress (MWC). Our invitation-only breakfast events will provide insights into: 1. Smart Device & Smart Experiences in a Multiscreen World 2. Adjacent Market Opportunities & New Business Models for Service Providers Presentation Date: Tues. 26th & Wed. 27th Feb. 2013 Location: Expo Hotel, Calle Mallorca 1-23, Barcelona (Map) Transportation back to the new Fira will be provided Registration & Breakfast: 8AM Session: 8:30-10AM Each presentation is a unique opportunity to hear an objective market view from some of our senior analysts. Our events are free of charge but as we have limited space we ask you to register in advance using the buttons above and below or by going to our website at: www.strategyanalytics.com/MWC2013.html This year's presentations will be complemented by demonstrations of our Teligen OECD Mobile Price Benchmarking Services, Handset Country Share Tracker, ConsumerMetrix survey database as well as PriceTRAX and SpecTRAX, both before and immediately after the breakfast. Join us for a demonstration at 10am, straight after the breakfast presentations. If you have any questions, please do not hesitate to contact us, otherwise we look forward to seeing you at the MWC in Barcelona! Please remember to indicate on which date you would like to attend. Please also note that copies of our presentation will only be made available to attendees and clients.
Steve Entwistle - Vice President, Strategic Technologies Practice

Tunable antennas improve smartphone battery life and reduce dropped calls

Several popular smartphones shipped in 2011 with compact, integrated antenna tuners, the first of a wave of such tuners from Peregrine Semi, RFMD and others. We have been looking into the outlook for active antennas & tunable components in cellular phones by comparing the different suppliers and technical approaches and we are now convinced of an upbeat forecast of the market through 2017.

Mobile devices that support 4G, 3G and 2G in multiple bands have complex RF front-ends, with compromises in antenna performance that can degrade calls, as Apple learned last year.  Tunable components can reduce dropped calls and improve battery life, while simplifying the cellphone.

Significant new strategic avenues open for radio component vendors

Antennas with tunable impedance matching will bring success to some new entrants such as WiSpry and inevitably shake up the existing order among cellphone RF front-end component vendors.

The new ‘antenna tuner’ product category will emerge as an important piece of the cell phone RF front-end, and we expect antenna specialists including Ethertronics and Skycross, in combination with front-end component suppliers including Skyworks, RFMD, Avago Tech, TriQuint and Murata, to compete aggressively in this segment using GaAs, CMOS, RF MEMS and voltage-dependent dielectric variable capacitor technologies.

Stephen Entwistle

Client reading: The Strategy Analytics report, “Outlook for Active Antennas & Tunable Components in Cellular Phones”  reviews the prospects for tunable RF components, comparing the different approaches and suppliers, and provides an upbeat forecast of the market through 2017.

We have become aware that our Apps Processor market share numbers have been challenged and that prompts us to explain our methodology and to give more details on this specific question regarding Marvell versus MediaTek.

Firstly, Strategy Analytics has a rigorous top-down and bottom-up methodology to measure the mobile processor markets. With our extensive apps processor methodology, we can account for every single smartphone apps processor ever shipped and every single dollar ever earned by mobile processor companies. We source the smartphone device shipment data from our “best-in-class” Wireless Smartphone Strategies (WSS) service. Also, we look at every single smartphone’s apps processor supplier using our popular SpecTRAX database service. Using these comprehensive inputs from our device research service teams, we built an extensive quarterly mobile processor tracker models, which are well received by our clients for their granularity and attention to details. In addition, we regularly check our numbers with leading mobile processor vendors in the industry.

The commentator asserted that Strategy Analytics “totally missed” Marvell which is unfounded. We are one of the first research firms to report Marvell’s TD-SCDMA smartphone growth (see our Q1 2012 PR and tracker report). We wrote the following at that time. “Marvell’s strong TD-SCDMA smartphone applications processor shipments at China Mobile were not sufficient to offset its declining shipments at Research in Motion. As a result, Marvell dropped out of the top-five.” Marvell's TD-SCDMA customers include RIM, Sony Ericsson, Samsung, Motorola, LG, ZTE, Huawei and Hisense. We are well aware of Marvell’s momentum in the Chinese TD-SCDMA smartphone market.

We estimate that Marvell’s smartphone apps processor shipment declined 26 percent Y/Y in 1H 2012. Marvell’s shipments to RIM declined 55.2 percent Y/Y in 1H 2012 while its shipments to non-RIM customers increased 44.9 percent in the same period. Please also note that Marvell is not the sole apps processor supplier to RIM.

The commentator also disputed our apps processor estimates for MediaTek. With our extensive OEM and chipset vendor relationship matrix we can account for the significant number of shipments for MediaTek in 1H 2012. Please note that MediaTek also participates in non-China smartphone markets such as Africa, Eastern Europe, India and Latin America. We are also aware that not all MediaTek’s apps processor shipments are 3G (UMTS / TD-SCDMA). MediaTek’s EDGE smartphone processor MT6516 is also popular in sub-$100 Android smartphones in emerging markets.

We are as keen as anybody when it comes to observing and tracking mobile processor markets. We always keep our ears to the ground and capture every single signal coming from primary sources. We are confident in our methodologies and numbers.

Sravan Kundojjala

Microsoft announced at CES-2011 that its next generation Windows PC platform will run on ARM architectures. NVIDIA, Qualcomm and Texas Instruments were named as key ARM silicon partners. We think this is good news for stand-alone ARM applications processor vendors such as Texas Instruments (TI) and throws the company a lifeline at a time when the market is moving towards integrated solutions.

By our estimates, the market for stand-alone applications processors in smartphones contracted from 70 percent in 2007 to just under 30 percent in 2009. Vendors such as Qualcomm are driving the baseband-integrated applications processor market and these integrated processors are increasingly gaining acceptance in the smartphone market. The integrated approach is currently popular in the low-to-mid range smartphones but is gaining traction in the high-end as well lately.

Microsoft's decision to port the Windows PC platform to ARM architectures changes the market dynamics dramatically. However, it's too early to tell what impact it will have on Intel as Microsoft hasn't revealed any timeline for these new products. ARM hasn't yet revealed its 64-bit architecture and current generation ARM processors also cannot support graphics computing APIs such as OpenCL. It will take at least another 18-24 months for Microsoft to reengineer its platform for ARM architectures and to build a software ecosystem around it. This should give enough time for Intel to bring power-efficient processors to the market. Intel is expected to feature in Nokia's MeeGo smartphones and tablets in 2012 which we think would be a great psychological boost to counter ARM-based processor vendors.

The likely specs for Windows on ARM architectures are:

• CPU: Dual-core / Quad-core ARM Cortex-A9; GPU: ARM Mali-400 / Third-party GPU

• CPU: Multi-core ARM Cortex-A15; GPU: ARM Mali T-604 / Third-party GPU (Most likely configuration and leading chip vendors such as TI, NVIDIA and Samsung were already announced as licensees of Cortex-A15 cores)

• Custom ARM processor designed by Microsoft and its hardware partners

This move is a good news for NVIDIA, Qualcomm and TI as it opens up new opportunities. Qualcomm already has customer relationships with top PC vendors and is expected to leverage them to expand into the Windows PC ecosystem. This move equally helps the stand-alone applications processor vendors to revitalize their businesses and to compete for higher volume. Broadcom, ST-Ericsson, Samsung, Renesas, Marvell and Freescale could also potentially feature as future Microsoft's partners.

We believe diversified device and OS landscape favors chip vendors as they can avoid the risk of being sidelined by powerful vendors. With Microsoft's support, ARM chipset vendors can now look forward to new markets that were unavailable to them previously.

Mobile phone applications processors power today's smartphone apps and increasingly phones are promoted as packing "1GHz processors" or even "dual-cores".

Last week we published our smartphone applications processor market share data and by our estimates global applications processor revenue reached $1.84 billion in 1H 2010, up 60 percent over the same period the prior year, primarily thanks to the growth in smartphones. The increase in the smartphone market is real and it has been reflected in silicon vendors' revenues and shipments as many players are re-positioning themselves to tap into this growth. The battle between the baseband-integrated applications processor vendors and stand-alone applications processor vendors continues to fragment the market.

Here are some top-level insights from our quarterly smartphone applications processor market share tracker for 1H 2010:

• In just three years, the market for stand-alone apps processors has shrunk from around 72 percent of the total apps processor market to just 32 percent in unit terms in 1H 2010.

• Qualcomm led the overall smartphone applications processor market with 35 percent revenue share, thanks to its early-mover advantage in the Android ecosystem. Qualcomm's integrated applications processors, which combine advanced air interface technology and applications processing capability, are increasingly gaining acceptance in the smartphone market. Qualcomm's smartphone applications processor unit shipment share increased from just 3 percent in 2007 to 19 percent in 1H 2010.

• Texas Instruments (TI) led the market in unit terms with the help of its legacy Nokia relationship. TI ranked number two in the stand-alone applications processor category with 24 percent revenue share. We believe much of the TI's future growth depends on the traction for its OMAP4 series applications processors and it may prove difficult for the company if it fails to line up big customers for its OMAP4 series processors in 2011.

• Samsung's relationships with Apple and Samsung helped the company to reach number one in stand-alone category and number three overall in the smartphone apps processor market in revenue terms. Samsung is set to continue its momentum into 2011 with the help of Apple and Samsung.

• Marvell ranked number four in both revenue terms and unit shipment terms on the strength of its relationship with RIM. Marvell's ARMADA 618 / 628 high-performance processors are expected to be adopted by RIM for its smartphone and tablet products in 2011.

• Qualcomm, Texas Instruments, Samsung, Marvell, Renesas and ST-Ericsson together accounted for 98 percent of total smartphone applications processor unit shipments in 1H 2010.

Looking forward, we expect new players such as NVIDIA, Intel, Broadcom and MediaTek to attack the high-growth smartphone market with focused efforts in 2011. We also expect the stand-alone applications processor vendors to fight back with high-performance dual-core processors in 2011 which could potentially increase their value share in 2011.

- Sravan Kundojjala

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.

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.

As smartphone shipments grow as a percentage of total mobile phone shipments, processor suppliers also have to revise their strategies to tap into this growth. Who is well-positioned? We think baseband vendors are well positioned to capture this growth given their leverage to work their existing OEM relations. To make the transition from the featurephone world to the smartphone world, processor vendors have to develop application processors and multimedia processors in addition to cellular baseband processors.

The game is no longer about slim modems. Based on our research many of the leading baseband vendors are missing the growth opportunities in the smartphone segment. Estimates in our recent report entitled “Can Baseband Vendors Translate Their Success into the Smartphone Market?” reveal that the cumulative smartphone apps processor unit shipment share of Qualcomm, ST-Ericsson, MediaTek, Infineon and Broadcom was just 21 % in 2009 despite their cumulative overall baseband unit shipment share of about 65%. What this means is that baseband vendors have not been too successful in converting their baseband design-wins into apps processor design-wins so far.

A chip vendor's success in the smartphone world comes from scoring design-wins at top-tier smartphone OEMs and supporting software platforms that have market momentum. This is one of the reasons why baseband vendors missed the smartphone boat as many of them were focusing on feature phone and basic phone segments. We think there is enough room for dynamism in the smartphone processor market as new entrants like Intel come into the value chain. If Intel acquires Infineon, as rumoured, that could put more pressure on stand-alone processor vendors, such as NVIDIA, that currently lack baseband products. Interesting times ahead. We’ll be watching how baseband vendors expand their value offering to crack the smartphone and other emerging devices markets.