Today, Ericsson and ST Micro announced the breakup of the ST-Ericsson JV with ST-Ericsson taking over the 4G LTE multi-mode slim modem product line, while STMicro will oversee the existing products including legacy modem business, RF, Power Management and NovaThor integrated apps processors. Earlier, in April 2012, ST-Ericsson announced the transfer of its stand-alone apps processor R&D activity to ST Microelectronics. In addition, ST-Ericsson will put its connectivity business up for sale, but the company hasn’t identified any potential buyer yet for that business. We note that previously, several big names have left the baseband market including Analog Devices, EMP (Ericsson Mobile Platforms), Freescale, Infineon, NXP, and Texas Instruments among others. The baseband market requires intensive R&D for a company to remain competitive.

ST-Ericsson struggled since its formation in February 2009. The JV hasn’t been able to produce a single profitable quarter during its existence so far. Part of the JV’s struggles can be attributed to duplication among legacy products, transition to a new product roadmap and constant management changes. ST-Ericsson was formed by combining the modem assets of ST Microelectronics, EMP, NXP and T3G (TD-SCDMA consortium). Clearly, the JV struggled to integrate multiple companies and execute on its original plan to become a leading mobile chip company both in Europe and globally.

ST-Ericsson failed to establish itself as a true competitor to market leader Qualcomm over the last four years. ST-Ericsson got stuck in continuous product transitions to fill gaps in its product lines while the market moved on rapidly. The company lost momentum in the TD-SCDMA market and later lost significant revenue opportunities at Nokia. In 2012, ST-Ericsson saw some success with its excellent NovaThor U8500 dual-core chip at Sony and Samsung and the company shipped about 25 million NovaThor chips in 2012. However, this late success couldn’t bring ST-Ericsson to profitability, given its growing debt burden and legacy products. Based on our estimates ST-Ericsson ranked number-five in the baseband market in unit terms in 2012.

The latest breakup announcement jeopardises the relatively successful NovaThor “ModAp” product line of ST-Ericsson. Ericsson said it will solely focus on multi-mode 4G LTE slim modems in future, and will pursue licensing opportunities for its NovaThor baseband-integrated apps processor business.

Ericsson said the company wants to be the number three player in the slim modem market, and the company has given a 18-24 month time frame to achieve that. We think this self-imposed target is really aggressive unless the company has un-announced design-wins with Apple and Samsung. Currently, Qualcomm and Intel are the dominant 3G/4G multi-mode baseband players in the market. Ericsson said its LTE-Advanced slim modem M7450 will ramp in 1H 2014 and the successor product M7500 will ramp in 1H 2015.

To achieve the number three position, Ericsson would have to score iPhone or Galaxy S design-wins as the market for slim modems is relatively limited outside of Apple and Samsung. Based on Strategy Analytics estimates, baseband-integrated applications processors dominated the smartphone modem market with 62 percent unit share in Q3 2012. Ericsson could potentially pursue M2M, USB dongles, tablets and other non-handset markets as an opportunity to expand its slim modem business, but this would put it in direct competition with Intel and many small, innovative LTE baseband suppliers such as Sequans, Altair and GCT Semi.

We were somewhat surprised by the lack of buyers for ST-Ericsson’s modem business given ST-Ericsson’s 4G LTE products, which are production-ready. We have been saying for a while in our baseband tracker reports that the JV's concerning financial performance would eventually make it as a takeover target. We feel that the slim modem business is not a long-term fit for Ericsson. In retrospect, we think that Ericsson and ST Micro’s venture to create a European cellular chip powerhouse was always going to be a challenge, one that ultimately ended in failure, not just because of the difficulty of integrating disparate cultures from different companies, but also because the formation of ST-Ericsson coincided with a drastic decline in the joint-venture’s top customers, Nokia and Sony Ericsson (now Sony).

Sravan Kundojjala

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

Last month we have published our quarterly cellular baseband market share tracker update and based on our estimates the global cellular baseband processor market registered an impressive 15 percent year-over-year growth in 1H 2012 to reach $8.1 billion.

Here are some highlights from our quarterly cellular baseband market share tracker:

• Qualcomm, MediaTek, Intel, Broadcom and ST-Ericsson captured top-five revenue share rankings in the cellular baseband processor market in 1H 2012.
• Qualcomm led the cellular baseband market with 51 percent revenue share in the first half of 2012 on the strength of its leading position in CDMA, W-CDMA and LTE basebands. Qualcomm's Snapdragon processor momentum has significantly helped. Qualcomm's LTE basebands have been adopted by almost all top-tier handset manufacturers.
• MediaTek ranked number two with 12.8 percent revenue share in the cellular baseband market in 1H 2012 with the help of its strong 3G smartphone processor shipments. MediaTek made a significant progress in 3G basebands in 1H 2012.
• Intel grabbed the number three spot with 12.1 percent revenue share in the cellular baseband market in 1H 2012 as the company’s strong 2G baseband shipments significantly helped during the quarter. Intel also did well in the 3G baseband market and ranked number two in the W-CDMA baseband market in 1H 2012. Strategy Analytics believes Intel's upcoming first LTE baseband platform, XMM7060, has the potential to cut into Qualcomm's LTE baseband lead in future.
• Broadcom continued to improve its product-mix and ranked number four in the cellular baseband market in 1H 2012. Broadcom’s 3G baseband shipments showed over 600 percent year-over-year growth in 1H 2012.
• ST-Ericsson ranked number five as the company's new NovaThor baseband apps processors gained strong traction, but were unable to offset its legacy product revenue decline.
• Spreadtrum continued its progress and the company now counts tier-one OEMs such as HTC, Huawei, Lenovo and Samsung as its baseband customers. Strategy Analytics believes that Spreadtrum is well-positioned to further its success in 3G and 4G basebands.

Overall, the baseband market continues to show strength as baseband vendors shifted their focus to high margin 3G/4G smartphone applications processors. We expect LTE to drive significant growth for baseband vendors over the next few years.

Sravan Kundojjala

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

Today we published our full calendar year 2011 tablet apps processor market share numbers. Based on our estimates, the global tablet apps processor market registered a staggering 230 percent year-on-year growth in 2011.

With Apple expected to announce its iPad 3 product today, the tablet market is poised for accelerated growth in the coming quarters. We expect strong efforts from Amazon, Google and Microsoft will serve as key catalysts for the non-Apple tablet vendors in 2012.  The main component beneficiaries are likely to be existing leaders TI and NVIDIA and catch-up players Intel and Qualcomm.

Some key highlights from our global tablet apps processor quarterly market share tracker:

• Apple, Texas Instruments (TI), NVIDIA, Qualcomm and Samsung featured in our top-five tablet apps processor market share rankings.

• In terms of architecture split, ARM-based processors accounted for approximately 98 percent of total tablet apps processor shipments in 2011, by our estimates. Key x86 players Intel and AMD are both expected to participate actively in Android 4.0 and Windows 8 based tablets this year.

• Apple led the applications processor market with 59 percent shipment share in 2011 on the strength of strong global demand for its iPad 2 product. Apple faced strong competition from chip suppliers to Android-based tablets, particularly in the second half of 2011.

In the non-Apple tablet apps processor market, TI and NVIDIA grabbed the lion’s share in 2011. TI led the non-iPad tablet apps processor market with 35 percent share followed by NVIDIA with 34 percent share in 2011;

• TI’s tablet success can be attributed to its high-volume design-wins at Amazon (Kindle Fire) and Barnes & Noble (Nook).

• In contrast to the smartphone market, NVIDIA performed well in the tablet market, thanks to its design-wins at Acer, Asus, Samsung, Sony, LG, Motorola, Toshiba and others. NVIDIA is well positioned to capture further share in tablets with its quad-core Tegra 3 processor in 2012.

• The smartphone processor market leader Qualcomm and the PC processor market leader Intel both missed the tablet boat in 2011. We believe that Qualcomm is well-positioned to capture meaningful share in LTE tablets and Windows 8 tablets in 2012. Intel is also expected to ramp up its tablet activity in 2012 to defend its dominant share in Windows PCs.

• We think Broadcom, ST-Ericsson, MediaTek, Marvell and Renesas need to improve their tablet market focus in 2012 as these companies haven’t scored significant tablet design-wins so far.

Nine months after its acquisition of Icera, NVIDIA officially kicked off its cellular platform strategy by announcing the ZTE Mimosa X, which is the first phone to feature Icera’s ICE8065 HSPA+ baseband. Previously, we have analysed NVIDIA's Icera acquisition in a separate blog post.

NVIDIA is targeting the mainstream smartphone segment with its new cellular platform strategy. We believe that NVIDIA is pursuing a 'risky' strategy (multi-core only) and may have to sacrifice its margins to address the mainstream segment. NVIDIA's competitors Qualcomm, Broadcom, ST-Ericsson, MediaTek and Spreadtrum have single core baseband-integrated apps processors that can address the mainstream smartphone segment with better margins.

It's no secret that every major mobile chipset company is now pursuing a 'complete platform strategy' to capture more value per design-win and NVIDIA still lacks technology pieces such as connectivity ICs (WLAN, Bluetooth, NFC, GPS and FM radio). NVIDIA may have to go for further acquisitions to fill this connectivity chip portfolio gap. Market leaders Qualcomm and MediaTek also pursued acquisitions to fill their connectivity chip portfolio gap.

NVIDIA is currently focusing on the performance smartphone segment but this segment is already cornered by Apple, Samsung and Qualcomm. NVIDIA ranked number six in the smartphone CPU market in 2011, by our estimates. The company should consider releasing a single-core version of its Tegra 2 processor to compete effectively and to increase its addressable market, in our view. NVIDIA is expected to have baseband-integrated Tegra processors ready by end of this year which could potentially allow the company to participate aggressively in the sub-$150 smartphone segment. But NVIDIA should also consider low-cost ARM architectures such as Cortex-A5 to improve its volume market share.

Sravan Kundojjala

Client reading : Smartphone Apps Processor Market Share 2011: Qualcomm Takes the Lead in Units and Revenue ; NVIDIA-Icera Combination Creates a Credible Challenger to Qualcomm

Last week, we released our smartphone apps processor market share data. Based on our estimates, the smartphone apps processor market showed a strong 70 percent year-on-year growth to reach $7.9 billion in 2011.
 
Some key highlights from our 2011 global smartphone apps processor market share tracker:

• Qualcomm, Samsung, Texas Instruments, Marvell, Broadcom and NVIDIA grabbed the top-six smartphone apps processor revenue share rankings in 2011.

• For the first time, on an annual basis, Qualcomm topped the smartphone apps  processor market in unit terms in 2011, snatching the long-held crown from Texas Instruments. Qualcomm continued its revenue share lead in 2011 and captured approximately 50 percent revenue share. Qualcomm’s broad Snapdragon processor portfolio and excellent relationships with almost all top-tier smartphone vendors helped Qualcomm to gain market share during 2011.

• Broadcom stormed into the top-five rankings in 2011 for the first time, thanks to its high-volume Android design-wins. Broadcom’s apps processor shipments showed over 500 percent year-on-year growth in 2011. We believe that Broadcom can improve its market share further if it continues to execute well.

• New entrant NVIDIA performed well in its first year in smartphones and finished as the number six player in both unit terms and revenue terms in 2011. Despite its first mover advantage with dual-core processors, NVIDIA lost momentum in the second half of 2011.

• MediaTek showed significant improvement in 2011, thanks to its new HSPA smartphone processor MT6573. However, we believe that MediaTek has some catchup to do to compete effectively in the high-end market.

• ST-Ericsson struggled in 2011 and finished the year with less than 1 percent revenue share. The company couldn't capitalize on its renewed product portfolio in 2011. ST-Ericsson's outlook is challenged and the company needs to execute flawlessly this year to get back into the game. We believe that ST-Ericsson's Nova and NovaThor processors have the potential to be an attractive alternative to Qualcomm's Snapdragon processors and it all depends on ST-Ericsson's execution this year.

• Stand-alone applications processors accounted for 40 percent of total smartphone applications processor revenues in 2011 and out-grew baseband-integrated applications processors, thanks to Apple, Samsung, Texas Instruments, NVIDIA and Qualcomm.

Looking ahead, we believe that key market trends such as multi price-tier smartphones, emerging markets and new generation CPU and GPU technologies will create opportunities for smartphone apps processor vendors.

Sravan Kundojjala

Client reading: Smartphone Apps Processor Market Share 2011: Qualcomm Takes the Lead in Units and Revenue

This week we released our multi-core smartphone applications processors (AP) market share numbers and based on our estimates the multi-core smartphone AP market showed very strong 180 percent sequential growth in Q3 2011.

Some highlights from our multi-core smartphone AP quarterly market share tracker:

- Multi-core smartphone APs gained strong traction in Q3 2011 and accounted for almost one fourth of total smartphone APs shipped in Q3 2011. Strategy Analytics attributes this growth to strong holiday quarter demand for flagship multi-core smartphones from major smartphone manufacturers.

- Samsung topped the multi-core smartphone AP market with 57 percent unit shipment share in Q3 2011, followed by Qualcomm with 18 percent, Texas Instruments and NVIDIA.

- Despite being somewhat late to market with dual-core processors, Texas Instruments ranked number three and took 13 percent share in the multi-core smartphone AP market in Q3 2011, thanks to its high-profile design-wins.

- NVIDIA ranked number four with 10 percent unit share in the smartphone multi-core AP market in Q3 2011. NVIDIA lost key design-wins to TI at Motorola. Neverthless, we believe that NVIDIA did very well in the mobile processor market in its first year and despite being a newcomer scored multiple design-wins. We believe NVIDIA can carry forward some lessons learned in 2011 and the company should focus on high quality design-wins and product portfolio expansion to gain volume share.

- ST-Ericsson had just 1 percent unit shipment share in the multi-core smartphone AP market in Q3 2011, by our estimates. Strategy Analytics believes that ST-Ericsson's Nova and NovaThor processors have the potential to be an attractive alternative to Qualcomm's Snapdragon processors.

- We believe Broadcom, Marvell, Renesas and MediaTek have some catching up to do to capture market share in the multi-core smartphone AP market.

- In contrast to the single-core processor market, stand-alone APs dominated the multi-core smartphone AP market and accounted for 90 percent of total multi-core smartphone APs shipped in Q3 2011.

Strategy Analytics projects that multi-core APs will account for 17 percent of total smartphone APs shipped in 2011, up from almost negligible shipments in 2010. We expect Samsung, Qualcomm, Texas Instruments and NVIDIA to be prime beneficiaries from this growth and to account for almost 100 percent of multi-core smartphone APs shipped in 2011.

We just published our latest tablet apps processor market tracker and calculate that the market registered a staggering 167 percent year-on-year growth in Q3 2011.

Some highlights from our quarterly tablet apps processor tracker:

- The non-iPad tablet applications processor market outgrew the iPad applications processor market in Q3 2011, almost quadrupling during the quarter.

- Apple led the tablet apps processor market with 54 percent unit shipment share in Q3 2011 on the strength of its content and developer ecosystem leadership in the tablet and smartphone markets.

- In the non-iPad tablet market, Texas Instruments (TI) took the leadership position with 47 percent unit shipment share with the help of high-profile design-wins.

- NVIDIA ranked number two in the non-iPad tablet apps processor market and showed 35 percent sequential growth in Q3 2011.

- Despite its leadership poisition in the smartphone market, Qualcomm is relatively a minor player in the tablet market. However, we expect the company to become a significant player with Windows 8 design-wins in 2012-13. Samsung also featured in our top-five non-iPad tablet apps processor rankings.

- In terms of architecture split, we estimate that ARM-based processors accounted for 98 percent of total tablet applications processors shipped in Q3 2011. Intel is currently focusing on the Ultrabook PC segment to tackle the tablet market threat and we believe it will take another 6-12 months for the company to outline its broad tablet strategy.

The tablet apps processor market is still in its nascent stage and we can expect to see a lot of future market dynamics as most tablet OEMs are still trying to come up with a profitable business model.

Today, we released our Q3 2011 global smartphone apps processor market share numbers and based on our estimates, the market grew 59 percent on a year-on-year basis to reach $2.24 billion in Q3 2011.

Here are some highlights from our smartphone apps processor market share tracker:

- Qualcomm, Samsung, Texas Instruments (TI), Marvell and Broadcom took the top-five places in unit share terms in Q3 2011.

- Qualcomm ranked number one with almost 50 percent revenue share in Q3 2011. The company benefitted from its multi-tier product portfolio and its strong relationships with equipment manufacturers. Qualcomm's Snapdragon processors gained strong traction and featured in multiple popular smartphones during the quarter. Despite its long-term emphasis on an integrated approach, Qualcomm now also participates in the stand-alone apps processor market with its APQ8xxx Snapdragon processors and took 4.3 percent unit share in this category. The APQ product line helped Qualcomm to tackle the LTE smartphone market as the company currently does not have an LTE-integrated Snapdragon processor yet. Qualcomm's LTE Snapdragon processors such as MSM8960 will debut in 2012.

- Samsung ranked number two overall on the strength of its strong dual-core processor momentum. Samsung ranked number one in the stand-alone apps processor category with over 70 percent unit shipment share. Samsung's dual-core processors featured in popular products such as the Samsung Galaxy S II and Samsung Galaxy Note.

 - TI ranked number three in Q3 2011 and showed signs of improvements after hiccups at its major customer, Nokia. We estimate that TI's shipments to non-Nokia customers grew 65 percent on an annual basis in Q3 2011. TI's dual-core OMAP4 processors featured in multiple popular products for the holiday quarter and this has helped the company to hold steady during the quarter.

- Marvell tried to diversify its customer base in Q3 2011 with its new TD-SCDMA smartphone processor, PXA 920. We believe the company has had some success so far. This, coupled with Marvell's recent LTE chip announcement should keep the company in the race.

- For the first time, Broadcom featured in our top-five smartphone apps processor unit shipment rankings, thanks to its Android ramp ups at a major customer.  Broadcom replaced NVIDIA as a number five player in Q3 2011. We believe Broadcom's management has now recognised the importance of smartphone apps processors and is likely to strengthen its efforts further in 2012. Broadcom has the potential to be a strong competitor to Qualcomm in the long-term, given the company's strong emphasis on wireless markets and integration capabilities.

- NVIDIA ranked number six in unit terms and number five in revenue terms in Q3 2011, by our estimates. Tegra smartphone shipments showed only modest sequential growth as the company lost design-wins to competitors' dual-core products at major customers.

- MediaTek showed significant improvement in Q3 2011 with the help of its HSPA smartphone processor MT6573.

The stand-alone applications processors out-grew baseband-integrated applications processors in Q3 2011 and accounted for over 40 percent of total smartphone applications processor shipments in Q3 2011, up from around 30 percent in the same quarter last year. This growth can be attributed to strong demand for dual-core processors and LTE smartphone shipments.

The smartphone apps processor market will continue to grow in the next few years despite the pressure on ASPs. There is enough room for new market entrants and for some significant market share changes in future.