CES: Qualcomm’s RF360 progress shows how it can defy Broadcom

Any company which has previously struck gold by focusing primarily on the cellular market now needs to move beyond that as quickly as possible. Nokia, MediaTek, even Apple are feeling the strain of the slowdown in revenue growth in mobile networks and devices. Perhaps the most vulnerable has been Qualcomm – so dominant in chips and patents, it had the furthest to fall, and its past few years have been heavily driven by the need to extend its engineering and licensing expertise to new sectors.

At last week’s Consumer Electronics Show (CES) in Las Vegas, it was talking up the successful aspects of those efforts, even under the shadow of a hostile takeover bid from Broadcom. Indeed, one of the topics on which Qualcomm placed the brightest spotlight was its RF front end portfolio, an area where it competes with its would-be parent.

This epitomizes one of the two main prongs of Qualcomm’s strategy to offset the decline in unit and price growth in system-on-chip products for smartphones. One prong is to boost revenue and market share by selling as many components of a device as possible; the other, of course, is to move into entirely new chip markets such as the connected car and the Internet of Things (IoT).

The best example of the first prong is the RF360 launch and the broader RF portfolio. Five years ago, Qualcomm took the gamble of playing for more of the real estate in a device by offering the RF as well as the processor and modem. That has paid off at last, and at CES, Qualcomm announced RF front end deals with Google, HTC, LG, Samsung and Sony Mobile – a considerable percentage of the non-Apple world (even if its products will not necessarily be in these vendors’ whole ranges).

In Las Vegas, Qualcomm president, Cristiano Amon, announced the deals and said the firm was making significant progress in a $20bn RF front end space – in which Broadcom, as well as Skyworks and Qorvo, are established vendors. The RF front end is the group of components which transmits and receives signals between the radio transceiver and the antennas, and includes signal filters, power amplifiers and antenna switches. This faces a challenging task in LTE, where there are so many band/mode (TDD/FDD) combinations being deployed on a large scale basis, and many niche ones. In 5G, the challenge can be expected to get even tougher.

Amon used the prospect of 5G to pursue a familiar Qualcomm theme – the need to integrate as many components as tightly as possible, in order to reduce cost, size and power consumption of a device, and maximize performance. In 5G, it will very difficult to build a radio platform which does not have the front end fully integrated because of the number of bands that will be supported.

Therefore, Amon argued, Qualcomm’s ownership of so many elements of the mobile platform will enable it to “disrupt” the market significantly. He believes about 1,000 band combinations are possible in 4G (which has 49 official spectrum bands) and that figure will be about 10,000 in 5G, making the current model of global band harmonization redundant.

In October, Qualcomm hit gigabit speeds in a demonstration which used a combination of its X50 5G modem with its SDR051 RF transceiver chip, showing how it aims to supply the whole chain from processor to modem to RF in 5G, as it has started to do in 4G since launching RF360. The speed was achieved by aggregating “several” 100 MHz 5G carriers in the 28 GHz band.

This combination of technologies has been included in a reference design to help speed development for device makers, and make it easier for vendors to develop 5G devices.

Upgrading the RF front end will be highly strategic to Qualcomm’s ability to compete in 5G, now that it has moved away from relying on third parties in this area. For its 5G NR reference designs, it has various band combinations including sub-6 GHz and mmWave options, which will be in the field this year.

Amon has said that the old assumption that every spectrum bands must be internationally harmonized must be thrown out. Operators will need to use any spectrum they can get, and chipmakers must support ever-greater band complexity in a flexible and dynamic, not rules-bound way.

Qualcomm relishes the challenge, he said, because it “allows us to push the boundaries of technologies in how we can maintain the great economies of scale with 5G”. To boost its armory, it pursued a joint venture with Japan’s TDK, finalized about a year ago. This was agreed with the idea, as Qualcomm CEO Steve Mollenkopf put it, to “transform us from a strong niche player to a formidable challenger with all the necessary IP blocks” in RF front ends.

The $3bn venture with TDK now runs under the RF360 name and has filled one of the falling number of gaps in Qualcomm’s portfolio – RF filters, one of the fastest growing components in mobile chipsets. Filters may not be high profile elements of the mobile device, but they are both important and expanding. The new venture will be able to offer a broad set of filters to enable OEMs to support the very wide range of frequency bands which will be relevant to 5G and the IoT.

It will support the main filter technologies – surface acoustic wave (SAW), temperature-compensated SAW and bulk acoustic wave (BAW). The end result should be a fully integrated solution combining these filters with Qualcomm components including power amplifiers, envelop tracking and switches (the last of these categories enhanced in 2015 by the acquisition of Antenna Tuning). TDK said it currently ships over 25m filter functions a day, including design wins with all the top tier smartphone makers, and sees demand growing.

The venture, in which Qualcomm has a 51% stake, is targeting drones, robotics, automotive applications and other IoT sectors, as well as cellphones. In some IoT sectors, pre-integrated modules – a minor element of the smartphone market, but a TDK speciality – will be essential.

As well as building more components around its core power base, the Snapdragon modem/CPU/GPU platform, Qualcomm is also taking that portfolio into all the markets which were most discussed at CES – especially the smart home, connected car and devices enabled by artificial intelligence and virtual reality.

We will analyze some of these in future issues, but many of the highlights center on the rise of smart voice – voice-activated, AI-enabled devices, led by the digital assistants which are being incorporated in smartphones, and in home devices like smart speakers and home media hubs. Qualcomm has expanded its home mesh networking platform to support voice recognition and so enable new services running on gadgets like Amazon Echo.

The reference design for the mesh network – which allows home devices to communicate directly, not through a hub – features the Qualcomm Aqstic Audio Codec, allowing voice-based applications to connect over the mesh. The platform has also been expanded to support Microsoft’s Cortana AI assistant technology as well as Android options like Google Now, Amazon Alexa and others.

Qualcomm also announced new editions of its own Home Hub platform, which will now support Android Things, allowing developers to create smart home networks based on Qualcomm connectivity and to run Google services and content. There are two levels of the hub. The simpler one links home devices and appliances such as refrigerators with digital assistant and audio capabilities; the richer one also supports edge computing capabilities and allows Android Things devices to use multimedia, video camera and touch display features.

Also in the audio and voice area, Qualcomm announced a Bluetooth SoC for wireless headphones, supporting digital assistants and Qualcomm audio features. Its Smart Audio Platform enables OEMs to build their own smart speakers for Cortana or Android; while another new reference platform allows vendors to build smart speakers based on the Amazon Alexa Voice Service.

All this shows Qualcomm recognizing how the smart home and other IoT sectors will rely far more heavily than smartphones do on reference designs in which most elements are pre-tested and pre-integrated, and in which vendors will differentiate with applications, branding and price. By offering platforms which will ease cost and time to market for OEMs, Qualcomm is seeking a powerful position, accelerating growth in the market and rising above the battles between Cortana, Alexa, Google and others. Of course, given Qualcomm’s damaging legal battle with Apple, it is unlikely to add Siri to its list, since the iPhone maker is trying to reduce its reliance on Qualcomm, not give it new entry points to the iOS value chain.

On the connected car side, Qualcomm announced new deals for its Snapdragon 820Am automotive platform – Jaguar Land Rover will use it for LTE and processing for  telematics units. Jaguar and Chinese electric car-maker BYD will both use the Snapdragon Automotive Platform to provide infotainment and digital measurement gauges in their vehicles.

Qualcomm’s NXP purchase comes closer to reality:

Qualcomm has become more amenable to major acquisitions and joint ventures in recent years, under pressure to diversify its activities and revenue streams. Examples include the TDK joint venture (see main text), the purchase of Atheros for WiFi, and now the proposed acquisition of NXP as a bold expansion in vehicular and IoT chips.

The deal to buy Dutch-based NXP is very important to Qualcomm’s ability to take a leading position in key connected car and other IoT spaces, but last year it came into question because of various regulatory issues raised in Europe, China and elsewhere. However, according to reports in the Financial Times, the deal will receive European Commission clearance this week.

The EC’s competition authority extended its probe into potential antitrust implications last June, and voiced concerns that it might “lead to higher prices, less choice and reduced innovation in the semiconductor industry”. Qualcomm has since proposed concessions to help allay the fears, most related to standards-essential patents and to licensing terms for some contactless technology. The FT sources said the EC was now satisfied that Qualcomm had addressed its concerns.

The contactless technology, NXP’s Mifare – which powers many smartcards – was an area of sensitivity. Reuters reported last summer that “rivals had urged the European Commission to ensure they would still be able to use NXP technology known as Mifare once the deal is done”. Rob Lineback, senior market research analyst at IC Insights, told EETimes there were two possible areas of concern – that Qualcomm would sell Mifare on to a Chinese business “as part of its efforts to win approval from China for the acquisition of NXP”; or that chip firms fear having to pay higher sums for licences to Mifare technology under Qualcomm’s ownership.

The Chinese competition authority, MOFCOM, was also rumored to want Qualcomm to divest certain key technologies– such as Mifare – before it would approve the deal.

EU clearance is not the only hurdle for Qualcomm to cross. It still has to secure shareholder approval but the number of shares tendered has been falling amid protests from some NXP investors – particularly the Dutch firm’s single largest shareholder, Elliott Management – that the price undervalues the company. Activist investor Elliott recently said the offer took advantage of NXP’s depressed share price when the deal was agreed in 2016, and that had effectively put a cap on the NXP share price since, so that investors missed out on gains. As of December 15 2017, only 1.9% had been tendered.

Broadcom reaches directly to Qualcomm investors:

The battle between Broadcom and Qualcomm continues as the former seeks to work around the hostility of the latter’s management and board, and convince shareholders directly that its takeover plan would benefit them.

In a letter, Broadcom urged Qualcomm shareholders to vote in favour of the appointment of a new board, which it said would support takeover negotiations. The current board rejected Broadcom’s 130bn bid, made in November 2017, claiming it “dramatically undervalued” the company.

Broadcom subsequently proposed 11 executives to replace the current board, arguing that Qualcomm shareholders were open to a deal. However, Qualcomm’s board responded by nominating its own 11 directors for re-election at the 2018 annual general meeting, which will be held on March 6.

In Broadcom’s latest move, CEO Hock Tan said that,  by voting for “11 independent director nominees, Qualcomm stockholders can send a clear message to the Qualcomm board that they should immediately engage in constructive discussions with us regarding our premium offer”.

The latter continued: “With enhanced scale, R&D resources, product diversification and financial flexibility, the combined company will be positioned to accelerate innovation and deliver the most advanced semiconductor solutions to customers around the world.”