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One can expect several heavyweights to fight for market share in the LTE market, as they do in the WCDMA and EV-DO markets. ST-Ericsson and Qualcomm have already announced plans to introduce LTE chips, while NXP and Texas Instruments have introduced platforms for software-defined radios that target LTE base station vendors. Broadcom, ST-Ericsson, Texas Instruments and Infineon are likely to put all their resources into a battle for supremacy of the 4G chipset main market. These players not only have the resources to deliver best-in-class silicon, they also have close relationships with Tier 1 equipment manufacturers that will enable them to impose their solutions at the expense of smaller players.
Early in the LTE diffusion curve, when many factors remain unclear and the market is still too small to motivate the heavyweights to get involved, it will seem like there is room for startups. But ultimately this will not be the case. Industry history tells us that small players will be unable to sustain a leadership position in the LTE marketplace unless they secure themselves a well-differentiated niche. The smaller the segment, the more likely it will be neglected by larger semiconductor firms, and the better the chances for new entrants and smaller players to succeed. However, finding that sweet spot is challenging.
Dual-mode solutions
Marketers keen to resolve the debate between WiMAX and LTE by joining the two under the same banner. Wavesat has made public its intention to focus on dual mode LTE-WiMAX combo chipsets, and I suspect many others are also eyeing this sexy niche in order to leverage their technical assets.
The need for international roaming justifies the demand for devices capable of seamlessly linking LTE and WiMAX. In some markets, in particular the US, Japan and probably Korea, we know that WiMAX is facing off against LTE. Both standards will be fierce competitors and ultimately, customers will have to choose which technology and which carrier serves them best. Faced with this situation, users might want to buy laptops equipped with both LTE and WiMAX chipsets and decide which service to opt for later.
Many users will not want to be tied to a single technology when they could have the option to switch at any time. The question is how much they are willing to pay to have this option. Two factors could impact the adoption of dual mode devices: their cost, and the availability of a variety of devices from which to choose. Have you ever seen a CDMA-GSM handset? Maybe, but chances are probably not.
Carriers' walled gardens are slowly beginning to open, and this will drive the demand for dual mode devices. One of the reasons why a CDMA-GSM handset has not proliferated is because it contradicts the interests of operators seeking to minimize customer switching, which could translate into higher churn rates.
To combo or not to combo
Now the question is whether dual mode devices will have embedded combos or two sets of chips (one WiMAX the other LTE). It is widely accepted that combos usually perform more poorly than distinct chipsets; what could make the case for LTE-WiMAX combos is lower cost or stronger requirements in terms of board area from equipment manufacturers. The case for combos also depends largely on the segment of devices we are dealing with.
If dual modes stand a fighting chance, it will probably be in the area of laptops or add-on form factors rather than handsets, consumer electronics, MIDs, etc. Currently, laptop customers care most about dollar-per-Mbps ratios, as they are the most avid users of mobile broadband. The industry push to embed laptops with WiMAX to laptops is likely to continue, given the potential WiMAX footprint in the developing world.
However, the case for WiMAX/LTE combo chipsets is rather weak, particularly for laptops. The main arguments smart marketers put forward to sell the concept revolve around the low cost of adding LTE functionality to WiMAX chipsets, and the possibility of sharing blocks between the two standards. This is to underestimate the technological complexity and differences between the two standards. For FDD LTE in particular, the architecture is significantly different than that of WiMAX. The support for 20 MHz channel bandwidth has also significant scale and design impact on the SOC. It requires heftier computational engines than conventional 10, 8.75, 5 and 3 MHz WiMAX channels. In terms of RFIC, support for the 700 MHz band is challenging if it needs to manage the conventional 2.5 GHz or 3.5 GHz WiMAX bands.
Because of the relatively smaller market for combos as opposed to distinct chips, amortization of fixed costs impact strongly cost structure as well as marginal costs. Although some synergies might exist in R&D, and some square millimeters could be saved on silicon area, combos will likely cost more than distinct chipsets. A solution based on combos needs to be sold at higher price in order to preserve margins.
Although they might seem attractive to some in theory, WiMAX-LTE combos will likely struggle if they are introduced into the marketplace. If they are brought to market, it will surely be players with an already strong presence in both the LTE and WiMAX spaces; there is little chance that combo chips will open the door to new entrants or to WiMAX companies who have been previously unsuccessful in entering the LTE marketplace.
WiMAX vendors will do better to focus on real market opportunities in the LTE chipset space, rather than try to create hype about products that make little market sense. The possible early involvement of ODMs in the LTE device marketplace presents one such opportunity.
Bilel Bouraoui is an infrastructure and devices analyst for Maravedis. Maravedis is a leading analyst firm focusing on disruptive technologies including smart networks using WiMAX, IEEE, and 3GPP/LTE. maravedis-bwa.com
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