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.

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.

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.

Strategy Analytics was pre-briefed on Nujira’s recent announcements on Tuesday 26^th January. The presentation was given by Tim Haynes, CEO and Julian Hildersley, VP Handset Products & Strategy and focused on recent progress they company has made in further commercializing their envelope tracking technology. Nujira’s High Accuracy Tracking (HAT™) Modulator technology as used in their Coolteq products dynamically control the power supply to the circuit in line with the transmission performance required, enabling the creation of highly efficient RF PAs for 3G and 4G cellular base stations, handsets and TV broadcast transmitters. Nujira has been successful in introducing its technology to the industry and current engagements encompass cellular infrastructure (12 OEM's engaged in trials), digital TV broadcasting (DVB, 2 OEM JVs), cellular handsets (one customer signed up) and a OEM trial for military radio. Nujira is targeting both CPE and infrastructure markets, but the company is adopting different strategies to commercialize its technology in these areas. While we do not see Nujira’s Coolteq technology translating to overnight changes in the wireless landscape, by partnering with leading GaAs and GaN technology suppliers, the company has developed a sound strategy for commercialization. Clients of the GaAs service can read more in the insight Nujira's Partners with RFMD and TriQuint to Target Higher Efficiency and Broadband Requirements Asif Anwar