Opinions vary on whether ST-Ericsson can survive in its present form, but the latest financial results are not encouraging.

In the company’s Q1 ’12 ending March 31, 2012, ST-Ericsson generated $290 million in revenue, down 29 percent from $409 million in the previous quarter.  Net income (loss) for Q1 ’12 was a staggering ($312) million, or more than 100 percent of sales.

The company’s latest turn-around efforts include staff reductions, facility closings, scaling back R&D, and outsourcing more activities to STMicroelectronics.  ST-Ericsson has also scaled back its ambitions in cellular chips, narrowing its focus to mid-tier smartphones.  The downside of this product focus is that ST-Ericsson is pitting itself mainly against Qualcomm and Intel.

You can see the players quarterly market share in these reports for basebands and apps processors.

In addition, the company has decided to gamble on CMOS on fully depleted silicon-on-insulator (FD-SoI) for future products.  We do not doubt the future of FD-SoI, but have some questions as to whether ST-Ericsson can successfully use the technology to get ahead of its competitors, all of whom have their own process expertise and deep pockets for funding R&D.

Some of the biggest challenges facing the company, as noted by its new CEO Didier Lamouche over the past three months:

• ST-Ericsson’s sales dropped to 30 percent of 2009 revenue in 2011, and appear headed for another 30 percent drop in 2012.  ST-Ericsson’s main customers lost market share in 2011, among these Nokia and Sony-Ericsson, accounting for much of ST-Ericsson’s loss of sales;
• Not coincidentally, smartphones using the Symbian OS lost share from roughly 40 percent of the smartphone market a few years ago to 12 percent of the market in 2011, replaced by Android (~51 percent) and Apple (~24 percent).  At the start of 2011, ST-Ericsson had no products to support these operating systems, nor did it have products supporting the Windows Mobile 7 OS now used in Nokia’s newest smartphones;
• ST-Ericsson consisted of three merged companies with 44 facilities at the start of 2012; managing these requires inculcating a culture that values customers and fast time to market in addition to technology, according to CEO Lamouche;
• In its haste to rationalize three overlapping product portfolios, ST-Ericsson did not protect its legacy 2G, 2.5G and 3G products adequately, suffering a rather precipitous drop in sales in 2011.

Mr. Lamouche has made several moves to improve ST-Ericsson’s profitability and get it growing:

• The company will concentrate on the high-growth smartphone segment, and within this segment will concentrate on support for mid-level smartphones, giving up support for low-end and premium smartphones as well as chips for feature phones and entry-level phones.  This will pit ST-Ericsson directly against Qualcomm and probably Intel in the future:
  • ST-Ericsson’s NovaThor U8500 and future evolutions of this baseband-applications processor such as the U8520 and L8540 (multimode with LTE) represent some of the only alternatives to Qualcomm’s Snapdragon baseband-applications processors so far:
  • New phones using the NovaThor U8500 include the Sony Xperia P and U, the Samsung Galaxy S Advanced, the HTC sensation Z710t, the Via U8500 and the Ontim WP8500 tablet;
• The company recently made further staffing and facility cuts to lower costs, among these moves to reduce SG&A by 25 percent through layoffs and attrition among top managers.  These moves should reduce costs by $320 million per year by the end of ’13 according to the CEO;
• The company will move its applications processor development and staff to STMicroelectronics, which will license products and technology back to ST-Ericsson.

The license agreement with ST-Micro covers the application processor development portion of ST-Ericsson’s future baseband-apps processors (“ModAp platforms”) as well as stand-alone applications processors for high-end smartphones and tablets.  Under the agreement, both companies will jointly promote and offer stand-alone applications processors slim modems.  The two companies will share in the development of ST-Ericsson’s previously announced A9540 and A9600 applications processors, in tandem with new M74xx slim modems for LTE, due to sample later this year.

In an effort to leapfrog its competitors, ST-Ericsson will develop future baseband-apps processors using fully-depleted silicon on insulator substrates (FD-SoI) at 28 nm:

• Processors built using 28 nm FD-SoI can run at 2.5 GHz clock rates with 0.6 volt supply voltage, attaining double the computational performance of similar chips built on standard high-resistivity silicon substrates;
• These chips will have 35 percent lower power consumption than similar non-SoI versions, equivalent to four hours more high-speed browsing, 2.5 hours more video streaming, or 2 hours more video uploading using a standard smartphone battery;
• ST-Ericsson will use substrates from Soitec, fabricated into chips by STMicroelectronics, which has leading-edge CMOS expertise at its Crolles fab and through membership in the IBM Semiconductor Development Alliance;
• According to Mr. Lamouche, FD-SoI will put ST-Ericsson ahead of Intel’s ‘trigate’ process, expected to reach the market in 2012 at 22 nm in Intel’s Ivy Bridge chipset for PCs:
  • Intel is widely expected to combine FD-SoI with its trigate transistors, but probably not until the 11 nm process node in 2014 or beyond.  So far, Intel has publicly stated that it has no plans to use partiall-depleted SoI, and no need to use FD-SoI at the moment;
  • Published research suggests that the STMicroelectronics will probably use its UTB (ultra-thin body) transistor process with FD-SoI for fabricating ST-Ericsson’s cellphone processors, probably an interim step to FinFETS roughly equivalent to Intel’s trigate transistors.

ST-Ericsson’s Jörgen Lantto, former Executive Vice President, Chief Technology Officer and Head of Strategy, noted in February at MWC that Intel’s Mobile Communications business unit will spend whatever is necessary to succeed in mobile devices, but that Intel’s corporate cost structure in the traditional PC microprocessor side of the business is not in tune with relatively low-margin chipsets for mobile devices, which may lead to some interesting adjustments at Intel in the future.

Perhaps true, but what ever transpires at Intel, ST-Ericsson will still face an uphill battle against well-entrenched competition.

For information on ST-Ericsson's Strategy and product roadmap, see Apps Processor Profile: ST-Ericsson's U8500.

For information on ST-Ericsson's recently announced products and related developments at Mobile World Congress 2012, see Cellular Radio Chip Developments at MWC 2012.

Christopher Taylor

Dr David Allstot from the University of Washington kick-started the 2010 IEEE Radio Frequency Integrated Circuits Symposium with a review of the challenges and ongoing research into CMOS power amplifiers for use in the cellular radio front-end. Highlighting the energy consumption and CO₂ emissions from cellular handset usage, Dr Allstot emphasized the need for more efficient PAs as continued motivation for development of CMOS PA technologies.  Research into CMOS PAs has been ongoing for around 20 years, with current designs achieveing around 1W power outputs and up to 60% PAE. The performance of typical power amplifier PAs including Class A, B and E were highlighted, and then put into context with the demands of current networks which place greater importance on PAs operating backed off from peak power with schemes such as 64QAM resulting in probability distributions that translate into actual efficiencies of only 5%.  Dr Allstot provided examples of digital PAs comprising multiple PA cells and power combining techniques that have been put forward to address these issues, and highlighted the potential for Class G power PAs that feature a hump-shaped curve with the first peak aligning with probability distribution curves of a 64QAM spectral signal and offering the potential for efficiencies as high as 24%.  While these results are promising, Strategy Analytics still sees a gap in performance capabilities between GaAs and CMOS PAs which is compounded by cellular handset requirements continuing to evolve. This translates into a moving target that places greater emphasis on linearity, efficiencies and peak-to-average ratios (PAR) and in our opinion will continue to favour the capabilities offered by compound semiconductor technologies.  Nevertheless, the pervasive nature of RF technology will open up doors for CMOS and SiGe PAs, while also continuing to provide growth the compound semiconductor technologies, and this was highlighted by the second plenary talk, given by Gregory Waters of Skyworks Solutions Inc.  Mr Waters provided an overview of how the growth in the cellular handset market has transformed the RF industry into a mainstream technology with future trends pointing to greater pervasive use of RF in multiple applications. Smartphones are leading the initial trends towards more complexity in the radio chain which translates into greater content and provides continued growth for the industry.  Video is the primary driver for the RF market moving forwards with social media driving demands for always-on connectivity. This in turn will translate into more RF content going into terminals to meet these needs. Skyworks estimated that average RF content has increased by around 2.5 to 4x the content required when delivering voice-only capabilities.  The different approaches in the cellular front-end to handle these growing needs were highlighted, from multiple PAs through broadband PAs able to tackle high-band and low-band RF chains, to solutions that will cover all bands through a converged solution. This will be coupled with techniques such as envelope tracking and digital predistortion to provide more linear, more efficient RF solutions.  The other key message from Skyworks was that RF technology will become even more pervasive in its application moving forwards, with embedded RF translating to multiple applications, examples including smart metering for utilities, vending machines and passive RF technology for tracking applications.  To serve market needs moving forwards, RF companies will need to continue developing a broad base of technologies that incorporate not only the RF, but also interconnects and packaging   Strategy Analytics sees this pervasiveness as a catalyst that will open doors for Si technologies while the growing complexity needed to serve the always-on connectivity will present continued opportunities for compound semiconductor technologies.

As usual Strategy Analytics is attending the IEEE International Microwave Week Symposium IMS / MTT-S in Anaheim, CA, from 23rd to 28th May 2010.

There is a lot going on from Strategy Analytics. We have our Defense Electronics Market Analysis Lunch (Register HERE)

and this year three of our analysts are available for briefings and meetings across a range of topics.

		Stephen Entwistle	Asif Anwar	Chris Taylor

While the event is free of charge, we will require registration to help with logistics and catering requirements. Once you've registered you will receive an email confirming your reservation. Please note copies of the presentation will only be made available to attendees and Strategy Analytics' clients.

Chris, Asif and I will be available for one-on-one discussions after the presentation. If you can't make it to the lunch or want a detailed discussion.......arrange a separate meeting ->

We look to seeing you in Anaheim and feel free to forward this invitation to other colleagues that may be interested.