US mobile TV chip designer MaxLinear has got its IPO away, raising $82.8 million, before costs, for the company and $20.8 million for selling investors. The listing values MaxLinear at just under $570 million.
MaxLinear is one of the leading designers of ISDB-T chipsets for handsets delivered in Japan, and sold 5,919,528 shares at $14 each with 1,491,186 shares sold by existing shareholders at the same price. The shares will trade on the New York Stock Exchange under the ticker symbol ‘MXL.’
Years ago MaxLinear took a gamble on Japan’s adoption of ISDB-T and its mobile TV 1 seg, and designed chips that now dominate that market with around a 70% market share. Over three years ago Brazil also adopted a version of ISDB-T and since then Venezuela, Peru and Chile have adopted the standard, and this week Ecuador has finally caved in. Columbia is also under pressure to follow suit, with Japanese companies promising $billions in subsidies to broadcasters to help manage their switchover programs.
The ISDB-T standard which MaxLinear RF designs dominate, will now eventually reach more than 400 million people, with something over half of that number of handset owners. Japan already has shipped 70 million 1 seg handsets, out of a population of 127 million.
Rival chip company Telegent, which offers a very different design of chip to capture and play analog TV signals, rather than special digital signals made for handsets, filed its registration statement around the same time as MaxLinear, in November last year, but has still not set a filing price and still has yet to float. It hoped to raise significantly more money, some $250 million, and may just be looking for the right terms and is perhaps watching the MaxLinear IPO carefully to judge the right timing and price.
Although both companies derive business from consumers wanting to watch TV on their phones, on the down side Telegent devices use about 6 times the battery charge and on the up side, it relies only on existing TV signals and does not need a relationship with a cellular operator. The reverse is true of MaxLinear which uses far less power, gets a clearer image, but can only flourish in markets where a specialized mobile TV signal has been created. It only needs to involve cellular operators where such signals are set up to deliver paid content, and so far it has never had to involve itself in a direct subsidy market.
MaxLinear is also attacking other digital TV markets and launched a digital cable receiver and demodulator earlier this month, which offers a tuner and MPEG decoder on one, low power, chip. It also makes a design for a basic chip version of an analog CAN tuner, which can work as a tuner for TVs during analog to digital change over.
Telegent announced deals earlier in March with both Samsung and Brightstar for its analog TV chips, which we thought might have constituted a pre-IPO publicity campaign to put it in the public eye. Samsung is the first tier 1 phone company to take analog TV on a phone seriously. Telegent chips in are sold in China, South East Asia, the Middle East and in Latin America.
Telegent is profitable and did $124 million in revenue in 2009 and $41 million in net income, whereas MaxLinear recorded revenues of $51.3 million and a net income of $4.3 million during 2009.
Telegent has boasted that it already has a hybrid strategy in place ‘ where its chips can take both analog and digital signals ‘ so that during a period when both signals are being broadcast, in the lead up to a digital signal switch off, such as the one that happened in the US last June, the chips would not become useless overnight, but would switch to digital signal reception. But the company has told us that its target for this is analog/DVB-T, implying that its next attack is Europe, to eliminate its almost total reliance on China for its business. Such chips eat way too much battery to be used in handsets, so this appears to be a PC chip strategy.
But the Chinese analog signal that Telegent relies on is slowly being replaced by the new DMB-T/H digital standard, which uses a Time Domain Synchronous – Orthogonal Frequency Division Multiplexing (TDS-OFDM) designed by Chinese exiles at the US company Legend. The chips produced so far are clumsy, large, heat producing and power hungry and there seems a long way to go.
There is no sign as yet that this will be anything like as successful as the digital mobile broadcast services CMMB, which has the design for digital mobile TV in China with around 5 million handsets having shipped there, so analog signals will continue in China for some years to come, possibly for 15 years.
This week Ecuador’s Superintendencia de Telecomunicaciones (Supertel) recommended to the National Telecommunications Council (Conatel) that Ecuador should join the trend towards ISDB-T technology in South America and now that recommendation has been accepted, reports local newspapers.
The decision will be laced with around $2 billion in Japanese investment leading towards a digital switchover in around 2016. Given the design of ISDB-T it is automatic that 1 seg (which is one out of 13 segments of the signal) will be enabled for digital broadcast mobile TV, just as soon as the system is put in place in a broadcast region.
Until Brazil took the leap into ISDB-T, most of South America was toying with DVB-T and one or two countries had declared they would use it. Ecuador was one such country, and is now reversing that decision. Ease of programming swaps and roaming capability for entertainment mean that eventually all of South American will go ISDB-T for digital and mobile TV, while Mexico is a staunch ally of the US and will use ATSC and its neighboring mobile standard ATSC M/H. MaxLinear is thought to be working on an ATSC M/H chip and told us last year that it was worried it had missed the boat on ATSC M/H after initially thinking it would never take off. Now it thinks there is still time to catch up as it is taking a little longer until volume handsets shipments for ATSC M.H emerge in the US.
Interestingly MaxLinear will now slowly try to dominate the TV chip business for handsets in all of South America. Established mobile TV chip designer Siano Mobile Silicon, which dominates Chinese CMMB shipments is also chasing the South American market with an ISDB-T chip design, as are several Japanese suppliers.
Interestingly Telegent is currently making hay in South America, once again on the back of the fact that digital TV will take a time to get up and running. Eventually Telegent will have to go to war with MaxLinear, because in each market where it is strong, digital mobile systems will emerge and the two will chase the same markets. To do this in South America Telegent will have to produce a hybrid ‘ a chip that can take both ISDB-T and analog.
So although these two TV chip businesses are utterly different, both in design and culture, there is a strong suspicion that they might one day have a lot more in common, in terms of markets and hybrid analog digital tuner technology ‘ do we sense a merger on the remote horizon? We’re sure they would both say ‘No chance.’