Thanks to independent tests by bloggers and journalists of data speeds on mobile devices, operators are beginning to hone in on the importance of better-performing chips. And right now commercially available HSPA+ devices are all over the board in terms of performance--a situation that could open the market to upstart vendors both big (think Intel) and small (think Icera).
Signals Research Group released its latest chip performance study and found that HSPA+ commercially available devices dramatically differ in performance--by more than 50 percent in some cases. SRG's study has become an annual event that chip vendors are eager to participate in because it is an independent test using Spirent Communications equipment that measures all of the competitors under the same repeatable circumstances. (SRG declined to provide the results of its latest test due to competitive concerns.)
The dramatic differences in performance are not unusual given the fact that the HSPA+ standard is still not cemented--the same trend was seen in the 7.2 Mbps and 14.4 Mbps HSPA versions.
"Standards are still in flux, which is one of the problems," said Will Strauss, founder and principal analyst with Forward Concepts. "And some companies did not engineer DSPs with enough horsepower."
Openings for new players
As such, there is a perfect storm of sorts for newer entrants to grab some market share as operators focus more sharply on device performance, said Michael Thelander, founder of SRG.
"We had a very wide mix of chipset suppliers--we tested nine different companies," Thelander said. "The dynamics of the industry are definitely changing. It used to be a couple of chipset companies that were best performing. That no longer is the case."
He cited MediaTek and Intel, which completed its acquisition of Infineon in January, as examples of chip makers whose chips performed only slightly lower than stalwart Qualcomm's (NASDAQ:QCOM) chips.
"Late entrants into the 3G chipset market have highly competitive solutions that rival the best chipsets that the industry has to offer," Thelander added. "Today's dominant chipset suppliers will need to continue to advance the performance of their chipsets if they expect to maintain their market leadership."
Thelander pointed to Intel's strong showing with its first HSPA+ chipset and the fact that it has significant influence in the PC industry. "What does that say for its prospects?" he asked.
SRG collected and analyzed performance results of 16 different device/chipset configurations from nine chipset companies, including HiSilicon (Huawei), Icera, Intel, MediaTek, Qualcomm, Renesas Mobile, Samsung and ST-Ericsson.
How chipsets can affect the network
Another takeaway from SRG's test: Performance of devices is becoming significantly more important to the performance of the network.
According to Nigel Wright, vice president with Spirent, poorer performing devices on high-speed broadband networks not only create user dissatisfaction but make networks more inefficient, which can affect operators' network costs and capacity.
"In the past, it was sufficient to have certified devices running on the network, but operators today have spent a tremendous amount optimizing their networks," Wright said. "If higher adaptive technologies like HSPA+ are interacting with the network all the time and the interaction doesn't go well, it is costing operators money if they have millions of poor performing devices on the network."
Steve Allpress, chief technology officer and vice president of modem software with chip vendor Icera, which is set to be acquired by Nvidia, said the situation allows chipset vendors to sell directly to carriers. "We've been most successful in three-way discussions involving operators like Vodafone and another vendor," he said. "We are really selling technology to the operator because they really care about performance."
U.S. operators such as Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T) and T-Mobile USA argue they have stringent requirements in place for their chipset and device vendors. They also conduct extensive handset testing.
With opportunities comes consolidation
While performance is becoming an important criterion for chipset selection, it still isn't enough. Icera's performance is high (the company ranked slightly behind Qualcomm in SGR's tests), yet the vendor had less than 1 percent unit shipment and revenue share in the cellular baseband market in 2010, according to Strategy Analytics.
"However, Icera is one of the prominent players in the mobile broadband market, in particular the U.S. market. Icera's soft modem basebands gained good traction among European and North American wireless operators in 2010 and the company is one of only a few that has market-ready HSPA+ / LTE basebands," said Strategy Analytics analysts Sravan Kundojjala and Christopher Taylor in a research note.
Icera supplies W-CDMA / HSPA / HSPA+ basebands for embedded and detachable mobile broadband modem devices. And while it has no share in handsets yet, it is on track to ship its first voice-supported baseband modem by the fourth quarter.
"One of the problems Icera had is that people didn't believe their roadmap because they were so small," Strauss said. Nvidia's purchase of Icera's baseband technology should create more traction with top device makers and operators, he said
Nvidia's Icera acquisition is a continuation of the consolidation trend in the mobile broadband chip market that was triggered when Intel announced its intention to purchase Infineon last summer. Infineon is the baseband supplier to Apple, Nokia, Samsung and LG.
Indeed, several WiMAX chipset providers have turned to the LTE market and now offer single-mode LTE chips--but analysts believe those players will be acquisition targets for vendors looking to expand into the LTE devices market.