Broadcom Corp. has bought its way into cell phones.
Since 2002, the Irvine-based chipmaker has acquired a handful of cell phone chip companies and pieced together a lineup that covers every major function in phones.
It makes chips that are the brains of phones,processors, power-saving chips, radio transmitters.
Broadcom also has a hand in all of the extras, including Bluetooth for nearby networking, wireless networking for longer range connections, video, TV and GPS, among others.
“It’s been a very focused strategy in the past five years,” said Robert Nalesnik, director of marketing for Broadcom’s mobile platforms group. “We’ve essentially assembled a complete portfolio of products to address the market as it grows.”
The company has landed chips in phones made by two of the top five makers, Samsung Corp. and Nokia Corp. The companies use some of Broadcom’s chips, but not all of them, to drive their phones.
Broadcom still is small in wireless chips. The company has at best 5% of the market, according to Nalesnik.
Broadcom does lead in Bluetooth chips, where the company had a head start supplying chips for wireless keyboards, game controllers and other devices.
|
|
Broadcom mobile TV chip: company spends about a third of revenue on R & D; |
The company’s push into cell phone chips has brought it into competition with the biggest players in the industry, including San Diego-based Qualcomm Inc., which has faced off with Broadcom in a running court fight.
Other dominant players include Texas Instruments Inc., Marvell Technology Group Ltd. and STMicroelectronics NV.
Broadcom’s goal is to grab 10% to 15% of the cell phone chip market by 2010, according to the company.
Acquisitions have gotten the company where it is now.
It paid about $260 million to buy Santa Clara’s Mobilink Telecom Inc. in 2002.
Two years later, it paid $100 million for San Diego-based Zyray Wireless Inc. and $123 million for Britain’s Alphamosaic Ltd.
“We methodically built or purchased all the pieces we would need to compete in the top tier,” Nalesnik said.
The market is big.
More cell phones are sold than any other consumer device,roughly 1.3 billion phones were bought worldwide last year, according to Nalesnik.
That’s more than the number of PCs and portable music players sold.
“An interesting dynamic in the market is that on average, consumers buy a new phone every three years,” Nalesnik said. “What’s driving the market is replacement plus new subscribers in emerging markets.”
Market in Flux
Market share,both for cell phone makers and their suppliers,is always changing, said Will Strauss, principal analyst at Forward Concepts Co., a market tracker based in Tempe, Ariz.
That leaves room for Broadcom to grow, he said.
“The market is fragmented, but that’s good for them,” Strauss said. “The fact is there’s room for them to move upward.”
Having lots of engineers and getting in early with companies as they design phones are key, Strauss said.
“They’ve got to continue heavy research and development spending to get there,” he said.
Broadcom spent $363 million, or a third of its $1 billion in fourth-quarter revenue, on research and development. The company doesn’t break out spending on wireless chips. (Qualcomm spends about 25% of sales on all research and development, while Texas Instruments is at 14%).
The typical cell phone design cycle lasts anywhere from 18 months to two years.
“There are literally tens of thousands of tests that have to be passed,” Nalesnik said.
Broadcom is in talks with cell phone makers planning their products for 2010, Nalesnik said. It doesn’t disclose customers until the phones hit stores, if at all.
The company has two divisions working on chips for cell phones: the mobile platforms group and the wireless connectivity group.
The mobile platforms group focuses on designs for the heart of the cell phone: the baseband, or processor. The group also works on radio chips, another vital piece that sends and receives signals from cell phone towers.
“One hundred percent of phones have these chips,” Nalesnik said. “That’s the core of the cellular system.”
It’s also the chips where Broadcom goes head to head with Qualcomm.
CEO Steps In
Chief Executive Scott McGregor temporarily has taken over the mobile platforms group after longtime vice president Yossi Cohen stepped down this month to be chief executive of San Diego chip startup Symwave Inc.
Broadcom’s connectivity group designs chips for Bluetooth, Wi-Fi, GPS and mobile TV that go into other handheld devices and can be used in cell phones.
“They can sell across the market and connect to any device,” Nalesnik said. “There’s a lot of optimization for power and size that make them phone-specific.”
The company, which has more than 6,000 workers worldwide, doesn’t break out how many workers make up the two divisions.
Here’s a look at Broadcom’s chips for phones:
n Baseband processor: The brain of the cell phone, it manages all communications processing and other functions, including menu buttons.
Qualcomm leads the baseband processor market, followed by Texas Instruments and STMicroelectronics.
n Radio: a chip that transmits and receives radio signals to and from cellular towers. Broadcom integrates the radio onto the baseband chip, which saves space and power. It competes with Qualcomm and STMicroelectronics.
n Software processor: allows software on phones to run while the main baseband processor handles more basic phone functions. Texas Instruments is No. 1, followed by Marvell.
n Power management: a chip that maximizes battery life, a key feature in phones that do more and more tasks.
Competes with Texas Instruments, STMicroelectronics, Freescale Semiconduc-tor Inc. and NXP BV, Royal Philips Electronics NV’s former chip arm that Broadcom’s McGregor once headed.
n Multimedia processor: handles music, photos, video recorders and video games. Competes with Texas Instruments and Marvell.
n Bluetooth chips: allows a phone to link with a wireless earpiece or connect with other devices, such as a car stereo.
Broadcom has roughly 30% of the market. Competitors are Cambridge Silicon Radio Ltd. and Texas Instruments.
n Wi-Fi chips: links phones to wider networks for access to the Internet for e-mail and Web browsing. Competes with Texas Instruments.
n GPS: provides navigation and other search-based services on phones. Sirf Technology Inc. is No. 1, followed by Broadcom.
n TV: receives digital TV signals for news, sports and other programs. Competes with Qualcomm.
Doing More With Less
Broadcom’s next push: packing more functions onto fewer chips. That cuts costs for cell phone makers, saves power and allows for sleeker designs.
“If you look at the trend it’s really to do combo chips,” Nalesnik said. “It drives the penetration even higher because the cost of the newer technology is even less.”
In October, Broadcom came out with its “phone-on-a-chip” semiconductor that combines a slew of features for cell phones that run on the newest and fastest wireless networks.
Another chip combines the radio, Bluetooth and Wi-Fi functions.
“We offer all of these components, but our strategy is to figure out how we can drive them to a single chip,” Nalesnik said.
There are no wireless chip acquisitions in the near-term horizon for Broadcom, according to Nalesnik.
“We’ve got a pretty good portfolio,” he said. “There is nothing really glaring that’s missing right now.”
