Broadcom got out of the cellular baseband business in mid-2014 because it was losing $2 million per day staying in that market, which is dominated by Qualcomm (NASDAQ:QCOM), Intel, MediaTek and others, according to CEO Scott McGregor.
In an interview with EE Times, McGregor said that the decision to exit the baseband market in July 2014 was a "very painful" one, but that the company "saw the deteriorating condition in the economics of that business in terms of pricing and margins."
"There were a number of players in the space who didn't care whether they made money or not. And they had imperatives to be in that business at all costs," he said. "It's a little different from how we run Broadcom as a for-profit company."
In July 2014 Broadcom said it would cut 2,500 jobs, about one-fifth of its total workforce, as part of a winding down of its baseband chipset unit. McGregor said that the company felt that to be successful in the market it had to have a larger market share and be among the top two or three players. Knowing it would never achieve that, the company decided to exit the market.
McGregor said that 500 of the 2,500 employees Broadcom cut wound up finding jobs within the company but the other 2,000 left. "Many of them were very good people," he said. "So, you never feel good about that."
"On the other hand, since we've done that, we've seen the profitability of the company dramatically increase," McGregor said. "I mean, we were losing about $2 million a day in that [baseband] business...so now, we are able to invest more."
McGregor has said that the company's combo connectivity chips, which support Wi-Fi, Bluetooth, FM radio, wireless charging and other wireless technologies, will help it maintain a strong place in wireless device market.
"So, if you think about the connectivity business, we won all of that business without any baseband participation," he told EE Times. "We never really had a high share in the baseband. We had a strong number one position in connectivity, and again, all without the benefit of baseband. That would have been on top of that share."
The Broadcom chief said the company has "very strong execution across the broad range of technologies. And we are really good at integrating different connectivity technologies. We are creating a platform out of connectivity technologies. And that doesn't change."
McGregor also said that connectivity platforms outside of cellular baseband tend to evolve twice as fast as baseband platforms. "If you ever put them together in the same chip, then, you will disadvantage the connectivity substantially, because it will be on average, one generation behind," he said. "So, that's problematic, certainly for high-end and in some cases mid-range chips, but less so on low-end."
In terms of next-generation technology, McGregor said the company is not working on "5G" cellular" baseband research and development, "but 5G Wi-Fi, that's our domain. We pioneer that technology. Absolutely, that's our strength and we will continue that." Indeed, Broadcom has been one of the champions of the WiGig standard.
- see this EE Times article
Broadcom introduces chipset for HDMI set-top dongle
Broadcom eyes cable broadband, OTT opportunity in India
Broadcom sees future in Wi-Fi chipsets for smartphones despite baseband exit
Ericsson to exit wireless-modem market, cut 1,000 jobs
Broadcom to slash 2,500 jobs in winding down of cellular baseband biz
Broadcom could sell cellular baseband unit, but buyers are not apparent