Qualcomm pursues consumer electronics with Bluetooth acquisition

Qualcomm Inc. plans to profit from in-house Bluetooth intellectual property to drive down the cost, power consumption and footprint of chip-based functionality in mobile handsets and consumer electronic devices, the company said last week in the wake of its acquisition of much of RF Micro Devices’ Bluetooth business for $39 million in cash.
That will allow Qualcomm to further exploit its handset business while also moving into new product realms, including stereo headsets, connected PDAs, personal navigation devices and gaming platforms, according to Behrooz Abdi, senior vice president and general manager of Qualcomm’s CDMA Technologies division.
Integrating RFMD’s Bluetooth IP into its own baseband chips will enable Qualcomm to offer its handset vendor customers a more attractive package of features that will help drive the rate at which Bluetooth is included in handsets, particularly in the low-cost, mass market where volume offers profitable opportunity, Abdi said.
“To drive the Bluetooth ‘attachment’ rate higher, we have to drive down the cost of these functions to reach entry-level phones,” Abdi said. “We have to drive costs to the handset vendors below the current $2.50 to $4 threshold.”
At the low-end of the handset market, this integration approach will propel volume plays, while at the high-end, integrating Bluetooth into Qualcomm’s baseband chip will enable handset vendors to include more functions in sleeker form factors, according to Abdi.
Qualcomm immediately announced two MSM baseband semiconductor products with integrated Bluetooth capabilities, but did not specify delivery dates.
At this point, consumer electronic devices with connectivity are somewhat unique and lack a common platform, Abdi said. Qualcomm, through its Snapdragon platform, intends to create such a platform that would be multi-mode and air-interface agnostic. Samsung Electronics Co. Ltd. has already signed on to use Snapdragon and consumer products are projected to reach retail shelves by mid-2008.
“We envision Snapdragon as a mobile broadband platform,” Abdi said.
Competition spurred move
RFMD said last week that it sold much of its Bluetooth business to Qualcomm, while retaining some profitable Bluetooth product lines such as its system-on-a-chip Bluetooth products, to better focus on its core competencies in high-growth markets. RFMD said that streamlining its cost structure was another advantage of the deal.
Semiconductor analyst Will Strauss of Forward Concepts said that RFMD might have been overwhelmed by competition from other Bluetooth purveyors such as Texas Instruments Inc. and Broadcom Corp., leading to the sale to Qualcomm. For Qualcomm, “integration will be the key to everything,” Strauss said.
As to whether the purchase opens the way for Qualcomm to move beyond the mobile-phone market into consumer electronics, Strauss was dubious. The mobile-phone market will continue to see nearly a billion units per year, while the connected consumer electronic market in the near-term can be measured in the tens of millions of units, he said.
ABI Research suggested otherwise. In reaction to the Qualcomm-RFMD deal, ABI analysts said that Qualcomm’s ownership of Bluetooth IP would boost the nascent, connected consumer electronics market. Qualcomm’s Snapdragon platform will enable mobile consumer electronic devices that have connectivity via 3G, Wi-Fi and Bluetooth, according to principal analyst Stuart Carlaw.
Qualcomm’s stake in the Bluetooth market, as a result of its acquisition from RFMD, will ease its entrance into the mobile consumer electronics space, Carlaw said. Bluetooth use in gaming and the music player markets is growing, he said, and Qualcomm’s Snapdragon initiative “clearly signals” the San Diego-based semiconductor company’s intent to expand beyond the mobile communications industry.