Eyeing the Mobile World Congress through a semiconductor industry lens, Deutsche Bank analyst Ross Seymore sees the battleground of tablets and operating systems shifting from basebands to application processors, and ultimately boiling down to integration and prices.
Nokia: MeeGo to Windows. Android's growing popularity in smartphones and tablets was in the spotlight at the recent Mobile World Congress, but what created buzz among semiconductor vendors was Nokia's announced shift to Windows from the Intel-backed Linux-based MeeGo platform. "Most chip vendors at MWC were trying to put on a positive spin on this change, but we found a pervasive sense of uncertainty as to the chip procurement implications," writes Seymore in a research note. Perceived winners in this shift: Qualcomm (incumbent in the Windows ecosystem) and possibly Texas Instruments (incumbent at Nokia in basebands). Intel and Broadcom would be potential losers amid the uncertainty surrounding the OS shift, ramp timing, and opex requirements, he speculates.
War of the app processors. The emergence and user embrace of smart phones and tablets (netbooks, we hardly knew ye!) is shifting the battle of silicon from basebands to application processors, and there's a "core war" brewing among numerous (at least 10) vendors trying to differentiate on how many ARM cores (single, dual, quad-core) and frequencies (1GHz-2.5GHz) they can offer.
It's all about price and integration. Ultimately, end-users generally don't care about the guts and components of their smartphone or tablet unless it impacts usability. So, inevitably, the key advantage for mobile chip components will be about price, and favor those who can leverage cost-cutting benefits of integration (baseband, connectivity, etc.)
Room enough for everyone? Bottom line, the markets for smartphones and tablets are probably big enough that there's significant growth potential for chip vendors, but competition will be fierce and even intensify, from basebands to application processors to connectivity. Once handset vendors whittle down their OS choices, look for technical differentiation to give way to pricing pressures, and the winning OEMS will be those who can offer various wireless silicon solutions that can be integrated to lower silicon costs. (Seymore's looking at you, QCOM, BRCM, and MXIM.)