Broadcom Corp.’s long-awaited push into the developing LTE smartphone market is under way.
The Irvine-based company last week announced that it began shipping two chips to power the latest standard of wireless communication, commonly referred to as 4G connectivity.
Samsung Electronics Co., the world’s largest consumer electronics and smartphone maker, is Broadcom’s debut customer in the emerging LTE market, which is currently dominated by San Diego-based rival Qualcomm Inc.
“We will become the only alternative, and we can enable the same range of products,” said Ketan Kamdar, vice president of Mobile Platform Solutions. “So far, there hasn’t been any competition in LTE.”
Qualcomm adopted a wait-and-see posture in response to Broadcom’s announcement.
“We welcome the competition, but we cannot comment on a product we haven’t seen yet,” Qualcomm spokesperson Claudine Ricanor said in an e-mail.
Broadcom’s LTE chips are its newest system-on-a-chip offerings—they each feature 5G Wi-Fi, Bluetooth, GPS and near-field communication applications. Industry observers speculate that the Broadcom LTE chips could be included on the much-hyped Samsung Galaxy S5, which Samsung is expected to debut next week.
Broadcom is also targeting other original-equipment manufacturers and contractors that sell LTE-enabled smartphones for less than $300, a segment Broadcom has identified for growth in the coming years.
Industry forecasts estimate that as many as 250 million to 350 million LTE smartphones will be sold globally this year.
LTE smartphones provide speedier access to the Internet, much faster data rates, and generally improve user experience. The U.S. is considered to have the most advanced LTE network as wireless carriers continue to pour billions of dollars into infrastructure upgrades, but overall growth in the segment is coming from emerging countries in Asia and Latin America.
“People want a lower-cost product,” Kamdar said. “That’s the basic driver for all these networks.”
Broadcom is promoting what it calls the “turnkey” nature of its LTE chips, which enable manufacturers to choose among a host of ready-for-production components, such as camera and modem applications. The features can easily be switched out in different models, bringing down research and development costs and speeding time to market for manufacturers.
The chips also feature standard Android software to ease compatibility and are smaller than competitors on the market, thereby reducing power consumption by 20% in some cases, the company said.
The LTE segment carries much higher margins than the communications chips Broadcom has made its specialty. It also extends the company’s reach as a supplier.
“If we just sell connectivity in a phone, even if it’s really good connectivity, we have an opportunity to get maybe $3 to $6 per device,” Chief Executive Scott McGregor told Wall Street at the company’s December analyst day in New York. “By selling the complete platform that includes application processors, modems, power management, et cetera, we have an opportunity to collect between $10 and $30 per device.”
Renesas Electronics
Broadcom acquired key LTE assets in October from Tokyo-based Renesas Electronics Corp. in a $164 million deal. The buy included a dual-core LTE chip and brought 1,200 employees—mostly engineers—from Renesas Electronics’ floundering mobile division in Europe and India.
Some of the employees were part of Nokia’s legacy modem team in Finland, which had been working on the technology for 15 years, selling billions of 2G and 3G modems along the way.
Renesas bought Nokia’s wireless modem business in 2010 for about $200 million and was ready to shutter it before Broadcom started negotiations.
Broadcom first entered the LTE segment in late 2010 with its $316 million acquisition of Santa Clara-based Beceem Communications Inc., which brought 4G expertise.
