As discussed in the prior article in this two part series, the past year was a challenge for the baseband market with revenue falling and competition increasing, especially from vertically integrated OEMs. Each supplier is uniquely positioned to address the challenges from the maturing smartphone market and chipset supplier competition. Below are synopsis of where each supplier stands and how they are positioned to meet the challenges brought in 2016 and beyond.
Revenue from Qualcomm’s chip producing business faltered last year, a result of increased competition from internally produced SoCs from Samsung and Huawei as well as increased price competition and an expanded set of suppliers for LTE chipsets in mid-range and entry level smartphones. However the company continues to dominate the mobile handset digital baseband competitive landscape with 58% of revenue in 2015. Qualcomm continues to be at the leading edge of the modem market when it comes to technological capabilities, with commercially available products already supporting LTE Cat9. The upcoming Snapdragon 820 supports LTE Cat12/13 and will also support LTE-U, or LTE in unlicensed spectrum. The first device to utilize the 820 was announced at CES and more devices using the upcoming premium focused SoC are sure to be announced at Mobile World Congress and should be released by around the middle of the year. On an earnings call management recently announced that there are over 100 design wins for the Snapdragon 820, highlighting robust traction when compared to the 60 products in various stages of development with the Snapdragon 810 at this point a year ago. Qualcomm will turn to Samsung to produce the Snapdragon 820 on its second generation 14nm FinFet LPP process. Depending on its success, this could provide Samsung with a high volume opportunity that may help fill the void left by Apple’s recent foundry diversification strategy.
Recently Qualcomm was the first to announce an LTE-Advanced Pro modem, the X16, which is capable of Cat16/13 downlink and uplink speeds respectively. The X16 will be the first 14nm FinFET standalone modem design and will also support LTE-U and Licensed Assisted Access (LAA) technology. The X16 and supporting RF Transceiver will be the first commercially available LTE solution that will support gigabit speeds and will also support new frequency bands at 3.5GHz.
Last year was also more challenging than initially anticipated for MediaTek, which had an initial target of shipping ICs for 450 million smartphones by the end of the year; however the company’s guidance was revised down to 400 million in July. The company appears to have sold ICs in support of over 150 million LTE smartphones last year as well, placing them as the second largest LTE baseband supplier to Qualcomm. MediaTek’s focus has been on what the company deems the “super mid” tier, devices with robust feature sets when it comes to user facing functions such as camera functionality and screen quality, but with lower price tags than that of premium flagship devices from the likes of Samsung and Apple. Price competition is fierce in the mid-tier and entry level LTE segments and companies entering the market must be prepared to face prospects of lower than expected profitability from these products, at least initially. According to the IHS Competitive Landscaping Tool, in Q4-15 MediaTek’s gross and operating margins were at their lowest since it entered the LTE market in early 2014; driven partially by lower margins on some of the LTE products as it has pushed to gain market share. Despite the difficulty in entering the LTE baseband market, as MediaTek increases its market share and evolves its Helio product line with the X20, the margin pressure may eventually ease.
The X20 will be the next installment in the Helio line of smartphone products focused on what MediaTek calls the “Super-mid-tier”. The 20nm X20 will include a tri-cluster, deca-core CPU design, and offer a Cat 6 LTE world mode modem and expanded RF band support when compared to the X10.
Over the course of the last year Samsung increased its reliance on its Shannon line of modems, pairing them with internally produced power management and radio frequency integrated circuits (RFICs) in many models of their premium smartphone offering such as the Galaxy S6, S6 Edge, S6 Edge +, and Galaxy Note 5. The Exynos offering has expanded in 2015 to include an integrated modem and applications processor (Mod+AP), The Exynos 8890 was announced in November, with mass production beginning by the end of last year. This should indicate its availability for the next S series device, typically announced in the first calendar quarter.
Samsung recently announced a new 14nm FinFET Exynos processor, the Exynos 7 Octa 7870, which is aimed at upcoming mid-range smartphones and other relevant devices. The new Exynos sports eight Cortex A53 cores running at 1.6GHz and a Cat 6 LTE modem. The new processor will be in production during the first quarter of this year. Samsung tends to make design choices on each product independently, often times choosing between designs using third party ICs and those using internally produced components. As such, it remains to be seen how many products will rely on internal solutions in 2016.
In April Spreadtrum announced its first Cat4 LTE chipset which has achieved some initial success during the year, driving an increase in its LTE market share. Focused on the entry-level segment, Spreadtrum’s total available market is mostly limited to the size of that segment. IHS expects the entry level smartphone market to grow by a CAGR of about 6% from 2014 to 2019, which should provide Spreadtrum opportunity for growth over that time. Since its acquisition by Tsinghua, Spreadtrum’s engineering and R&D resources have increased, which could make it possible for the company to begin competing at higher levels in the smartphone market.
Initially its apps processors were paired with Balong thin-modems, however with the release of the Kirin 910 the company progressed to an integrated Mod+AP offering. The Kirin 930 and 950 have continued to build on the Mod+AP design with general power and performance improvements in each generation of product. The Kirin 950 offers Cat6 speeds and includes other features such as a Tensilica DSP for Hi-Fi audio.
Marvell was one of the first movers into the Chinese LTE market in 2014, winning business with OEMs such as Coolpad. The company’s market share has fallen in 2015 as other firms such as MediaTek, Spreadtrum (Tsinghua), and Leadcore have released entry-level or mainstream LTE chipsets into the Chinese market. Marvell will continue to diminish as a major baseband supplier as it shifts focus to what it sees as more profitable areas such as the IoT and Automotive markets.
While its LTE baseband market share has been very limited thus far, Intel has made some strides in providing a more competitive mobile portfolio with its purchase of Via Telecom’s CDMA assets. The addition of CDMA technology to Intel’s mobile product line could expand Intel’s addressable market. Intel has initially struggled to sell large volumes of its SoFIA platform, but may be able to gain some traction by releasing an integrated LTE solution in the future.
The company announced its first Cat4 LTE SoC in late 2014, a 28nm, six core A7 clocked up to 2GHz. The chipset supports 2K displays, up to a 20 mega pixel camera with support for 1080p HD recording and high efficiency video coding. Active mainly in the Chinese baseband market Leadcore could see sales rise if it continues to partner with high volume OEMs such as Xiaomi.
It all starts at the top: 2016 may be a challenging year
IHS currently predicts that semiconductor revenue will shrink by less than half a percent in 2016. The growing smartphone market could provide baseband suppliers an opportunity to outpace this growth, but the year will not be without challenges. Leading high-end smartphone OEMs such as Apple, who’ve enjoyed growth with each product release, are now signaling a slowdown. In Q4-15 iPhone sales were flat for the first time on a year-over-year basis, and suppliers such as Qualcomm and Skyworks have so far guided to a first quarter which could be down more sharply than is seasonally normal. In the baseband and smartphone markets, the second half of the year is typically the better half, and outlook so far has confirmed brighter prospects for this time period. Regardless of how the overall semiconductor and baseband markets perform, suppliers with broad technology portfolios, system level expertise, and products to satisfy OEMs in every market segment will be the best positioned for growth this year.