Chipsets supporting mobile infrastructure have become highly sophisticated, especially for small cells where the Systems on Chip (SoCs) include 48 processor cores or even more. There are ARM or MIPS cores and separate DSP cores for specific functions, as well as hardware accelerators for the PHY. Each chip company spends tens of millions of dollars to develop the silicon for each new product.
Competition for SoCs in small cells is heating up. We've now finished the phase where a dozen companies contended for the small cell market. Some companies have been acquired, including Picochip, Design Art Networks, and Percello. Mindspeed will join this list soon, as a strategic buyer is currently looking to acquire their wireless business. Others have simply dropped out of sight.
The remaining players fall into two categories:
- Texas Instruments and Freescale come to the small cell market with strong relationships at Tier One OEMs. Their approach: Give the OEM a hunk of silicon that is flexible, to accommodate OEM software in Layers 1-3 and sometimes higher layers. The emphasis is on running an OEM stack which comes out of the macro base station world.
- Cavium, Qualcomm, Broadcom, and Mindspeed come into the market without the advantage--or the baggage--of supporting top-tier OEMs at the radio level. As a result, these companies tend to license software or develop their own stack. The final product is a more complete system.
A growing software business has now emerged, including companies such as Aricent, Radisys, Node H, and MimoOn to support a variety of applications in 3G and LTE. With LTE, it's becoming more straightforward now to develop a chip and license the PHY or the higher layers.
Cavium's approach is especially interesting since they have a royalty-free license for an LTE PHY, and they have developed their own Layer 2/3 stack. Cavium offers the SoC solution with a free stack. So far, this approach has worked out great for them, and Cavium has emerged as the early leader in small-cell SoC shipments.
Surprised? It comes from deployment of almost 100,000 enterprise and carrier-grade small cells in Korea, where Cavium and Mindspeed were the two primary SoC vendors designed in. Cavium successfully navigated the early glitches and scale-up issues to capture the majority of the opportunity, with all three mobile operators. Freescale and TI obviously have products available, but we believe that Cavium's free stack was an important factor in setting them up for success.
In the outdoor small cell market, we expect the major OEMs to dominate, and chip suppliers like TI and Freescale will dominate along with them. Outdoor small cells will be highly coordinated with the macro layer. Achieving decent performance will be nearly impossible for anybody that doesn't have access to the proprietary algorithms involved with handovers, data packet forwarding, and CSFB. LTE-Advanced will make this challenge even tougher, with CoMP and eICIC operating with even more proprietary messaging traffic.
However, as we see in Korea, the indoor market is different. Most operators don't expect indoor small cells to execute soft handovers with the macro layer. As long as the 3GPP standards are met for network coordination, indoor small cells are "good enough." That means that the most expensive part of the system (the proprietary OEM software) can be taken out of the equation...and indoor small cells can be a lot cheaper than outdoor units.
We expect that success by Cavium, Broadcom, and Qualcomm will drive other SoC suppliers to offer embedded solutions, with the silicon and the entire radio stack, and the indoor small cell market may begin to look like the Wi-Fi market or the Bluetooth market. In this business model, ODMs can take over the manufacturing at the box level and all of the big value will reside in the chipset and the stack.
Overall, the difference between indoor and outdoor units will be much more than the metal box. The entire ecosystem will be split, with different chipset and software developers for the indoor and outdoor markets.
Joe Madden is Principal Analyst at Mobile Experts LLC. Mobile Experts is a network of market and technology experts that provide market analysis on the mobile infrastructure and mobile handset markets. He provides market forecasts for handset, DAS, small cell, and base station markets, with in-depth research down to the nitty gritty details of frequency bands and power levels. Mr. Madden graduated, cum laude, from UCLA in 1989 and is a Silicon Valley veteran. He has survived IPOs, LBOs, divestitures, acquistions, and mergers during his 24 years in mobile communications.