- 14 September 2006 -

Market Research Round-Up: Cautious Optimism in Chips & End-use Markets

The past week has been unusually alive with reports on market progress and forecasts. Overall, the industry looks to be in good shape. However, in keeping with some warnings from recent financial results announcements, there are grounds for caution in some quarters. For instance iSuppli reaffirms some observers' notion that GaN will likely not be able to achieve price parity with the ubiquitous LDMOS in base stations. Barring some kind of transformation in the technology and manufacturability this is probably going to be the case. But then again the III-nitrides were once deemed too challenging for blue LEDs and lasers. The impetus is different of course base station components will never reach the multi-billion dollar mark the latter have already become.

RF Industry Outlook Brightens, Says Strategy Analytics

Demand for RF components in the first quarter of 2006 remained strong, supported by strength in the cell phone market, according to Strategy Analytics. Fifty-three percent of the top RF component suppliers covered reported significant profits, and the number of suppliers reporting net losses remained relatively low, by recent historical standards.
As a sign of optimism in the industry, funding in RF start-ups approximately doubled from the previous quarter to $250 million, led by VC interest in basebands for multi-mode 3G and WiMAX," said Chris Taylor, Director of the RF & Wireless Component service.
"Volumes remained at historical highs for the leading power amplifier (PA) suppliers, most of whom made cautious plans to expand capacity," said Asif Anwar, Director of GaAs and compound semiconductor market research and advisory for Strategy Analytics.

www.strategyanalytics.net


GaN Device Pricing Will Never Approach LDMOS

Today, gallium nitride is entering the mainstream of process technologies for RF power semiconductor devices. Apart from some military applications and microwave communications, most of the interest in GaN is centered on mobile wireless infrastructure and WiMAX. But according to ABI Research, the economics of this price-sensitive sector may mean that it is the wrong playing field for GaN.

"Aside from the newness of the technology, device cost is a huge negative for GaN when compared with Si LDMOS in conventional amplifier circuits," said Lance Wilson, a research director at ABI Research. "As time goes on, incremental improvement in GaN pricing will help mitigate this problem. However, ABI Research believes that GaN device pricing on a one-to-one basis will never approach Si LDMOS for mobile infrastructure. It is simply a more expensive process technology."

Some developments may reduce the price gap, and performance must also be factored into the equation. But even if superior performance is achieved, says Wilson, it will probably be only incremental. The conclusion? "In mobile wireless infrastructure, the two technologies are more or less equal in price and performance. GaN will capture some portion of the RF power amplifier business for mobile wireless infrastructure over the next few years, but certainly not all of it.," said Wilson.

ABI Research believes that there will be too many GaN participants for this market segment, and at least half will drop out willingly or be forced to do so. Is GaN's future cloudy, then? Not at all. At frequencies above 4 GHz, beyond the performance range of Si LDMOS, GaN may dominate practically all of the high-power markets. Eudyna Devices and Toshiba have wisely targeted the microwave (greater than 4 GHz) markets for much of their participation with GaN, and they will reap considerable benefits from doing so.
The 6-page ABI Research brief, "Gallium Nitride RF Power Devices: Is the Market Consolidating Before it Takes Off?" (RB-RFPD-101; 3Q 2006), is part of the RF Power Devices Research Service.

www.abiresearch.com


The Cellular Modem Market is Finally Taking Off

The cellular modem market has taken many years to develop, but by the end of this year it will reach a notable milestone, with annual shipments to exceed 5 m units, reports In-Stat. This market got a boost from embedded cellular modems in laptop computers, a class of modem only introduced toward the end of last year, the high-tech market research firm says. Embedded cellular modems should account for more than 10% of total modem shipments in 2006.

"With the growth of cellular modems, also comes growth in revenues from the sale of cellular modem cards, as well as growth in revenue spent on wireless data services for these modems," says Allen Nogee, In-Stat analyst. "In-Stat estimates that revenues from the sale of cellular modem cards and embedded cellular modems in laptops will reach approximately $1 billion in 2008."

www.in-stat.com


Nokia and Motorola Boost Chip Spending in 2005 and 2006

Leading mobile phone makers Nokia and Motorola Inc. will increase their semiconductor spending by the highest percentage among the world's top ten OEM chip buyers in 2005 and 2006, according to market forecasts by iSuppli Corp.

Top-ranked mobile-phone brand Nokia of Finland will boost its chip spending by 15.1 percent in 2006 as an encore to its 12.7 percent increase in 2005, according to data from iSuppli’s OEM Semiconductor Spend Analysis service. Number-two mobile-phone OEM Motorola of the United States is projected to increase its semiconductor purchasing by 14.5 percent in 2006, following a 20.7 percent rise in 2005.

Both companies will handily exceed the global average increase in chip spending of 7 percent in 2005 and 7.7 percent in 2006. They also will surpass the average rate of growth of semiconductor spending among wireless communications OEMs of 7.3 percent in 2005 and 6.3 percent in 2006.

"The rapid increases in chip purchasing by Nokia and Motorola reflect the success the two companies have achieved in the global mobile-phone market," said Min-Sun Moon, OEM spend analyst for iSuppli.

Nokia in 2005 gained 3.5 percentage points to attain a unit market share of 32.6 percent for mobile phones, according to iSuppli. Motorola in 2005 attained an 18 percent unit market share, up 3.3 percentage points from 2004.

Motorola continued to gain mobile-phone market share throughout the first half of 2006, while Nokia resumed its advance in the second quarter, after a slight dip during the first three months of the year.

The two mobile-phone giants also have achieved revenue growth that has greatly exceeded the industry average.

Motorola's electronic equipment revenue rose to $32.6 billion in 2005, up 23.9 percent from $26.3 billion in 2004. Nokia's electronic gear revenue increased $38.1 billion in 2005, up nearly 18 percent from $32.3 billion in 2004. In contrast, average electronic equipment revenue for all OEMs tracked by iSuppli rose by just 8.3 percent between 2004 and 2005.

Looking beyond the top 10 chip purchasers, China’s Lenovo posted the largest increase in semiconductor spending, at 265 percent. Lenovo’s chip spending was boosted by the acquisition of IBM’s PC Group. This acquisition also caused IBM’s chip purchasing to decrease by nearly 33 percent in 2005.

Apple Computer Inc. of the United States posted the second highest OEM spending increase in 2005, at 140 percent, largely due to its strong iPod business.

www.isuppli.com

Music, Browsing and Video to Drive Mobile Entertainment Market

Music, browsing, and video services will be the key drivers behind the growth of the Western European mobile entertainment market, according to Analysys. The analysts expect music in particular to experience tremendous growth, with revenues rising by more than 75% per year to reach EUR3.4 billion by 2011.

The report also cautions that while revenues for mobile broadcast TV services will be considerable in the longer term, operators will struggle to recoup their initial infrastructure and spectrum costs.

"Until TV reception chips are embedded in the majority of handsets, there will be virtually no revenue from casual viewers. At the outset, content will only be accessible to that small core of users who are prepared to purchase specialised devices and pay a significant premium for them."

Total mobile content revenue is forecast to grow at a compound annual growth rate of 29.2%, from EUR4.9 billion in 2005 to EUR23.4 billion in 2011.

research.analysys.com/