The cellular chipset and baseband markets have gone through rapid changes in the past three years, with Qualcomm emerging as the clear leader ahead of MediaTek, ST-Ericsson, Infineon and Broadcom, the five suppliers with the best prospects for long-term viability and sustainable profitability in the market. Qualcomm’s baseband market share grew from just over 30 percent in 2007 to almost 40 percent in 2009, about double its nearest competitor MediaTek. Is this a trend that will culminate in Qualcomm taking over the entire baseband and chipset industry, with competitors relegated to niche status with a few percent share each?
Aside from antitrust implications, the top OEMs have all implemented an alternate sourcing strategy to reduce their dependence on any single vendor for crucial components such as chipsets (basebands and transceivers, usually from the same vendor). Even Nokia has announced that it would spread its business around and use Infineon and Broadcom in addition to its traditional suppliers TI and ST-Ericsson. In the mean time, MediaTek is cautiously expanding into the top five with limited penetration at LGE and Samsung.
In practical terms, this means that Qualcomm will have difficulty sustaining a market share of more than 30 to 35 percent in basebands and chipsets in the long term. We have already seen this happen in cellphone PAs. In the PA segment, market leader RFMD, with more than 40 percent share, got taken down a few notches when Nokia opened up its purchasing to more PA vendors. Now RFMD and Skyworks have approximately equal share at around 25 to 30 percent, followed by all the other suppliers, none of which has more than 10 or 12 percent share.
In basebands, competitive developments will determine the long-term number two and number three players. Right now ST-E looks like a strong contender, but MediaTek, Infineon and Broadcom can by no means be counted out of the game.
For more on the baseband market, see our recent reports:
Rapid Changes in the Baseband Market Lead to Rising Fortunes for a Chosen Few
( http://www.strategyanalytics.com/default.aspx?mod=ReportAbstractViewer&a0=5342 )
Baseband Market Share Tracker: Qualcomm Holds 38 Percent Share by Revenue in Q3 2009
( http://www.strategyanalytics.com/default.aspx?mod=ReportAbstractViewer&a0=5345 )