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

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

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.

What would you do with $888 million?

• Expand your manufacturing capacity?
• Acquire a competitor?
• Enable the solid-state lighting revolution by moving up the supply chain?
• Shore up for an expensive legal battle?
• All of the above?

Such are the options for Cree. The North Carolina company, whose GaN LED chips are selling like very hot cakes indeed, has just posted record quarterly revenues and a pre-tax income of $28.4 million. That merely added to the company’s already swollen coffers, thanks to its September stock offering.

Cree sold 11 million shares at $35.50, doubling its cash balance at a stroke. As much as $900 million will soon be burning a sizeable hole in its pocket.

As Cree tries to keep up with the demand for its high-performance chips, the company needs to seriously expand its manufacturing capacity. It has earmarked up to $165 million to make significant additions to LED production and component packaging facilities. But even that expansion will still leave some $750 million in Cree’s war chest.

With a history of acquisitions, Cree could be scouring the corporate landscape for the kind of company that will help it kick on to another level. Another chip maker perhaps? Cree CEO Chuck Swoboda suggests a different tack entirely. With no obvious gaps in its stable of products (unless you count AlInGaP LEDs), he is looking for a deal that will catalyze the LED lighting revolution, rather than merely service it, thereby enabling the market for Cree’s customers, and their need for LED chips.

There is another reason why Cree might need that pile of cash. As one of the only companies to decline a settlement with the octogenarian academic Professor Gertrude Neumark Rothschild, its lawyers are probably preparing to do battle over key patents relating to GaN chips. These battles can be very expensive and Cree will want to make sure that it has the means to win the case, or at least afford any settlement agreement.

Strategy Analytics’ Strategic Technologies Practice releases regular insights and reports on the compound semiconductor industry, covering GaAs RF, GaN, LED and laser diode technologies and more. To find out more click  --->> HERE

Asif Anwar

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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