Broadcom is steadily assembling a mobile platform designed to rival Qualcomm in the integrated system-on-chip space ‘ which will drive almost all handsets in future as price and power consumption expectations fall. It already dominates in connectivity (Wi-Fi, Bluetooth, GPS and so on) but its modem/processor successes have mainly been at the low end, and were hit by the decline of Nokia. Now it has acquired the LTE modem assets of Renesas Mobile, which was shut down by its Japanese parent in early July, for about $164m in cash.
The US company, which has not yet shipped an LTE product despite showing off Cat-4 and LTE-Advanced roadmaps, will now own a dual-core LTE system-on-chip, the creation of a firm which was technically very advanced in 4G basebands, even though it failed commercially. Renesas Mobile, for instance, was the first company apart from Qualcomm itself to deliver a commercial LTE modem which was integrated with 3G rather than requiring a separate chip. Its flagship product, now Broadcom’s, is a multimode, multiband modem supporting LTE-Advanced, HSPA+ and EDGE.
This is a significant purchase for Broadcom, which has far better capability than Renesas Mobile to turn the Japanese company’s innovations into commercial sales, but has not managed to leap into the 4G vanguard in technical terms. Now it has an advanced SoC which is certified by large carriers in North America, Europe and Japan and is ready for volume production. As Will Strauss, president of chip analyst firm Forward Concepts, told EETimes: ‘Long-suffering Broadcom’s LTE program was a long way from a fielded product. Now, they say they’ll be shipping LTE in the first half of 2014. After all, the Renesas part has been qualified at Verizon, AT&T and NTT Docomo.”
This is the classic Broadcom pattern of course. Rather than investing heavily in R&D to create cutting edge technology itself, its greatest skill lies in timing, and knowing exactly when to snap up an innovator and use it as a springboard into a sector that is just about to blossom. The best example of that skill, perhaps, was 802.11g Wi-Fi, the point at which Broadcom knocked the early Wi-Fi chip leaders out of the park ‘ and it aims to repeat the experience in LTE.
As well as the product, Broadcom takes on 1,200 employees, mainly engineers and mainly based in Europe or India.
The announcement has come as a big surprise, since Renesas has been looking for a buyer for its mobile unit ‘ built around the acquisition of Nokia’s modem activities in 2010 ‘ for most of this year, but failed to find one. It therefore announced it would close down the division altogether. Of course, waiting until the last moment guarantees a good price, although the $164m tag will be a welcome bonus to ailing Renesas Electronics ‘ even though it paid $200m for the Nokia unit. For Broadcom, this is a very small amount of money to develop a high end multimode LTE modem and gain a year or so in terms of market readiness.
Of course, it has invested in its own LTE development team, and in extermal expertise such as the takeover of WiMAX modem specialist Beceem. These efforts will probably be integrated into the Renesas program now. Broadcom unveiled an LTE smartphone reference platform, with support for Cat-4 LTE, VoLTE and carrier aggregation, at February’s Mobile World Congress. The firm said at the time that its BCM21892 was the world’s smallest LTE modem. But, according to Strauss, a three-year R&D effort was still not very close to a shippable product, so the latest acquisition will provide a welcome leap forward.
Gary Mobley of the Benchmark Company wrote in a client note: ‘We view the acquisition as strategically important for Broadcom and should add further credibility to the company as an alternative merchant baseband chip supplier to Qualcomm, which is especially important since the merchant baseband chip industry has consolidated significantly in recent months.’
Credible technology is only one part of the story of course. Broadcom does not come close to Qualcomm in terms of long experience with cellular technologies; carrier alliances; R&D and patent muscle; or broad ecosystem. Nor will the giant’s market share be easy to erode ‘ Qualcomm sold 86% of the 47m LTE chips shipped in 2012, while Samsung was in second place with 9%, largely because of demand from its own handset company.
And these days, the larger firm can even challenge Broadcom in Wi-Fi, with its own strategic acquisition of Atheros. The Renesas Mobile deal is not Broadcom’s Atheros, but it will shift the LTE chip landscape and provide a welcome challenge to the leader ‘ likely provoking response from Nvidia, which is leveraging its Icera acquisition to create integrated LTE SoCs; MediaTek, which is expanding beyond its low end roots and seeking to take on Qualcomm at the cutting edge; and the 4G specialists like Sequans.
And at least the undoubtedly advanced technology created by the shortlived Renesas Mobile will not be wasted. In July, the Japanese owner said, amid tough market conditions across its businesses, it was pulling in its horns and focusing on its core business. It had previously hoped to sell the modem firm as a going concern but has apparently failed to find a buyer, despite reports of interest from Chinese organizations. It will continue to supply non-LTE modems and products already in mass production and with customers in place. However, this is likely to be an interim measure since Renesas Mobile has made ‘significant losses’ since its acquisition from Nokia, and its parent was in no financial position to implement and expensive turnaround plan. It secured a $1.8bn bail-out from the Japanese government last year.
This marked the end of an ambitious plan by Renesas to offset stagnation in many of its core businesses by chasing the high growth mobile sector, but given the established might of Qualcomm, Intel/Infineon and Samsung, and the rise of Chinese contenders, this was probably an excessively optimistic strategy in a time of global recession and deep problems in the parent firm. It had seen Texas Instruments, Freescale, Analog Devices and ST-Ericsson before it, all pulling out of handset modems, and only ADI managed to find a buyer for the business (which it sold to MediaTek).