China’s shifting sands spell trouble for Qualcomm, Broadcom
Among big changes in the works are China Mobile’s shift in procurement policy from five-mode smartphones to three-mode models, and big plans among Chinese apps processor vendors to embrace connectivity (WiFi and Bluetooth Low Energy).
Shift to three-mode smartphones
China Mobile, the world’s biggest cellular operator (in terms of subscriber numbers), initially bought only smartphones based on five-mode (supporting TD-LTE, FDD LTE, TD-SCDMA, WCDMA, GSM) and 10-frequency base band modems. The impetus behind this policy was said to help internationalize TD-LTE and promote development of multiple mobile communication technologies.
Last year, however, China Mobile relaxed its procurement rule to include three-mode (TD-LTE, TD-SCDMA, EDGE/GPRS/GSM) models.
As a result, those profiting from China Mobile’s new policy are China’s leading fabless chip companies such as Spreadtrum and Leadcore, along with China-based smartphones.
China Mobile sees three-mode smartphones helpful to launch more inexpensive TD-LTE smartphones, Chinese industry sources say. The operator hopes to aggressively promote its TD-LTE services, and the way to that goal is lowering required specification from five- to three-mode, they said.
For smartphone vendors making five-mode models, Qualcomm (which dominates the market) and Marvell were the only chip suppliers they could depend on.
In Qualcomm’s latest financial call last fall, president Derek Aberle acknowledged that he expects the global 3G/4G average selling prices will decline approximately 9-10% in fiscal 2015. Aberle explained, “Really a big part of the year-over-year decline is driven by growth in China, and in particular three-mode and Chinese OEMs I think gaining share over non-Chinese OEMs.”
Qualcomm believes the shift from five-mode to three-mode that began in 2014 will continue in 2015.
Qualcomm’s president said, “Throughout the course of 2014, the percentage of three-mode devices on China Mobile’s network compared with five-mode has really continued to shift over time to more a three-mode. And we expect that will probably continue at least into 2015 as well.” While Qualcomm did not provide specific numbers, some 50 to 60 percent of smartphones procured by China Mobile in 2014 were three-mode models.
Will Strauss, president of Forward Concepts, added, “I don’t see either MediaTek or Qualcomm losing out on this. Although they both have five-mode capability, either can easily field a ‘three-mode’ modem in a single quarter.” He added, “However, it does make life easier for Leadcore and Spreadtrum, since neither has a five-mode capability.”
A three-mode LTE turnkey solution Spreadtrum launched last summer, for example, supports TD-LTE, TD-SCDMA and EDGE/GPRS/GSM for the domestic China market.
Currently, a set of different baseband technologies are supported by different Chinese mobile operators, according to Forward Concepts.
A variety of bandbands used by different cellular operators in China (Source: Forward Concepts; EE Times)
What about WiFi and Bluetooth?
Thus far, Chinese fabless chip vendors active in smartphone and tablet markets have focused only on the development of apps processors. Absent from their portfolios are connectivity solutions such as WiFi and Bluetooth.
But that’s about to change, according to Eran Briman, vice president of marketing at Ceva, a leading DSP-based IP platform licensor. Actions Semiconductor, Rockchip, Allwinner and Spreadtrum in China all want connectivity solutions that can go inside mobile and wearable devices, he explained.
For Ceva, whose royalties continuing to come from shipment of 3G and LTE local smartphones in China, the game-changer is last year’s acquisition of RivieraWaves, which was a privately held Bluetooth and WiFi connectivity IP vendor based in Sophia-Antipolis, France. Briman said that Ceva is expecting non-baseband royalties to start flowing as early as this year [2015] and growing at a steady pace through 2018.
Many in the industry who regarded Bluetooth chips as a dime a dozen were caught by surprise when they saw a growing number of activities around licensing and acquisition of Bluetooth Low Energy technology. “Bluetooth Low Energy has changed the landscape,” said Briman.
Now, many apps processor vendors in China are eager to develop connectivity solutions of their own to offer to Chinese OEMs/ODMs by licensing IP core from Ceva, according to Briman.
Beyond 802.11ac and Bluetooth Low Energy, other connectivity IPs Ceva hopes to license, based on RivieraWaves’ wireless connectivity IP development activities, include 802.11ah (using sub 1 GHz license-exempt bands to provide extended-range WiFi networks), 802.11p (vehicle-to-vehicle communication for automotive), and future versions of Bluetooth.
For U.S. chip giants like Broadcom, who cracked the smartphone market by selling such connectivity solutions as WiFi and Bluetooth, this may spell trouble in the future.
Asked about the possible threat, Broadcom CEO Scott McGregor downplayed its gravity: “There are big differences between the best and almost the best… or not at all the best. I think people want to have the best technologies in these spaces. You need that to win specs, market values, and there are a lot of features you enable with these products.”
To be fair, WiFi has been a product of constantly evolving technologies. Broadcom has always been early to the market, grabbing the lion’s share by essentially offering a newly advanced product even before the new spec is finalized. It’s hard to top Broadcom’s technology prowess when it comes to connectivity.
However, Broadcom had to exit its LTE modem business in the smartphone market largely because of Qualcomm’s unyielding dominance and Chinese fabless companies who “had imperatives to be in that business at all costs,” as McGregor described. It remains to be seen if something similar could happen to connectivity chips in the mobile device market.
— Junko Yoshida, Chief International Correspondent, EE Times
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