The W-CDMA race has just started, but chipset vendors from all corners of the industry are driving to play in the nascent but growing market.
Already, industry heavyweights Texas Instruments Inc., Freescale Semiconductor Inc., Qualcomm Inc. and others have vaulted into the space. Although sales have been relatively sluggish to date, the market’s long-term potential is massive. Incumbent chip vendors see an opportunity to shore up their positions, while startups believe the transition to 3G represents an opening for newer blood.
So far, W-CDMA handset sales represent a relatively tiny portion of the overall mobile-phone industry. GSM phones continue to comprise the vast majority of worldwide handset sales; investment-banking firm UBS predicts industry will ship 529 million GSM phones this year out of a total of 762 million phones. CDMA comes in second, according to UBS, with shipments of 157 million phones this year. W-CDMA stands at a distance third, with 44 million.
However, UBS predicts W-CDMA handsets will see the greatest growth-rising to 137 million by 2007-while GSM and CDMA shipment figures will remain relatively steady.
Nokia Corp. was the world’s leading W-CDMA handset supplier in the second quarter, commanding 17 percent of the market, according to research and consulting firm Strategy Analytics. The company’s 6680 is the most widely distributed 3G device in Europe.
“We expect W-CDMA shipments to increase through the end of the year as carriers prepare for the holiday season and as form factor and functionality gradually improve,” said CIBC World Markets analyst Ittai Kidron. The firm recently counted more than 200 3G-handset models selling through European carriers.
The growing W-CDMA handset market stands as a major opportunity for the world’s chipset suppliers. TI and Freescale are hoping their dominance in GSM chips will translate to W-CDMA phones, while companies like Qualcomm and Intel Corp. see 3G as a way to expand their influence in the mobile-phone industry.
TI supplied 31 percent of the 17 million W-CDMA baseband processors sold last year, according to research and consulting firm Forward Concepts Co. Qualcomm came in second with 28 percent of the market, while Agere, Freescale and Matsushita Electric Industrial Co., rounded out the list.
The baseband processor represents the heart of most phones, and is generally the most expensive phone component. According to CIBC, W-CDMA baseband chips cost between $23 and $30. Baseband chips for GSM phones generally cost only a few dollars.
TI’s No. 1 position comes as no real surprise; the company is the world’s largest supplier of mobile-phone chips. Qualcomm’s No. 2 ranking indicates the company hopes to expand out of the CDMA market and into the larger W-CDMA opportunity. Qualcomm supplies the vast majority of CDMA chips.
“They realize their future is tied to W-CDMA,” said Will Strauss, president of Forward Concepts.
TI supplies 3G chips to Nokia as well as Ericsson Mobile Platforms. EMP sells phone reference designs-which include chips as well as the associated software-to companies like Sony Ericsson Mobile Communications L.P. Freescale sells its 3G chips to Motorola Inc.
Qualcomm counts LG Electronics Co. Ltd. and Samsung Electronics Co. Ltd. as customers for its W-CDMA chips.
“There aren’t too many horses in the 3G chipset race, which speaks volumes about the technical complexity associated with bringing a stable, scalable solution to market,” said John Jackson, a mobile-phone analyst with research and consulting firm Yankee Group. “Consider the 2G incumbents such as Analog Devices Inc., Philips Semiconductors and Infineon Technologies AG, who aren’t in the market in any meaningful way at this point. Others have sought to shore up competencies through partnerships or acquisitions.”
Jackson pointed out that Freescale acquired Prairiecomm Inc. as an effort to get into the W-CDMA market, while Broadcom Corp. acquired Zyray Wireless for a similar reason.
“This year we’re seeing several new entrants,” said Strauss of Forward Concepts.
For example, Strauss said Intel hopes to expand its relatively diminutive position in the wireless chip industry with sales of 3G products. Already, the company signed up BlackBerry-maker Research In Motion Ltd. to use its new 3G processor, which it codenamed Hermon. Intel is the world’s largest chip supplier-selling wares to desktop and laptop computer vendors-but is a relatively small player in wireless.
“Intel Corp. is the world’s largest wireless wannabe,” Strauss said.
As handset makers and chipset vendors jump into the W-CDMA race, another contest is just around the corner. According to research and consulting firm IDC, there will be 40 million HSDPA subscribers in Western Europe by 2009-representing a whole new race for chipset suppliers.
