Broadcom sees future in Wi-Fi chipsets for smartphones despite baseband exit

Even though Broadcom is exiting the cellular baseband market, CEO Scott McGregor thinks the company will have a secure place in high-end smartphones thanks to its Wi-Fi chipsets.

McGregor acknowledged that getting out of the baseband market could put Broadcom at a competitive disadvantage in getting its Wi-Fi chipsets into smartphones. However, he expressed confidence that the company's combo chips, which also support Bluetooth, FM radio, wireless charging and other wireless technologies, would aid the company's position.

"We're definitely at risk ... but the reality of it remains to be seen," McGregor told Reuters. "The higher-end smartphone space is most likely to stay with Broadcom because that's where they care most about the features and capabilities we offer."

Broadcom said in July it would cut 2,500 jobs, about one-fifth of its total workforce, as part of a winding down of its baseband chipset unit, an acknowledgement of the difficulties it has had in challenging the dominance of Qualcomm (NASDAQ:QCOM) in the baseband market. As it moves away from basebands, Broadcom plans to focus on other businesses, including set-top boxes and modems for home broadband connectivity; small cells; chips for network infrastructure and data centers; and the Internet of Things and wearables.

Broadcom's Wi-Fi chips currently are in Apple's (NASDAQ: AAPL) iPhone 6 and 6 Plus, Samsung Electronics' Galaxy S5 and other top handsets. Yet, as Reuters notes, some low-end OEMs choose to integrate Wi-Fi and baseband chips or go with one supplier to save money, which could threaten Broadcom's business as the company exits the baseband market. Those trends may eventually move to the high-end market as well.

However, McGregor said Broadcom is continually improving the range and speed of its chips, as well as reducing the products' interference and increasing their location capabilities. "A lot of people think of this as a static space but it's not. We're constantly evolving the technology," he said.

Broadcom's baseband unit was costing the company about $600 million a year in research and administration costs with little market share to show for it. The company is expected to explain how it will use the savings from shutting down the baseband unit when it holds an analysts' meeting in December.

For more:
- see this Reuters article

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