分析Broadcom并购Beceem：LTE市场起飞还需5年

Analysis: Inside Broadcom's bid for Beceem

by Rick Merritt

Beceem Communications has a solid team and solid financials, but not exactly the right product to get Broadcom Corp. into mainstream LTE markets quickly. But given Broadcom belief the 4G technology won't be widespread in handsets until at least 2015, the company has plenty of time to start new integrated designs that are the hallmark of its silicon strategy.

Broadcom bid $316 million to acquire Beceem which sells WiMax handset chips and has a multimode WiMax and LTE chip in development scheduled to sample early next year. That chip, the BCS500, will be in production in late 2011, according to an S-1 Beceem filed recently in an aborted plan to go public.

The S-1 provides insights into Beceem's rapid rise. The company has shipped more than four million WiMax chips since 2005—2.5 million of them in 2009 when sales spiked. In the last quarter of 2009, the company recorded $20 million in revenues and was briefly profitable.

Beceem reported revenues of about $14 million in both 2007 and 2008. But in 2009 sales soared to $43.6 million. The spike continued through the first half of 2010 when Beceem recorded $45 million in sales and trimmed losses to $10 million, down from $12 million in the same period in 2009.

Thus Broadcom is set to add as much as $100 million to its 2011 revenues with the Beceem acquisition, although it is not likely to add any profits in 2011. In addition, although Beceem claims to serve networks in eight countries, as much as 63 percent of its sales have gone to just two customers.

Scott Bibaud, general manager of Broadcom's mobile platforms group, said Broadcom is interested in LTE more than Wimax and bid for Beceem for its team of 200 people in India and the U.S. "There were a number of WiMax startups when they started in 2005, and they came out on top," he said in an interview with EE Times.

"We have had internal development work on LTE in Broadcom for a few years," Bibaud said. "What we get with Beceem is technology that has seen a lot more of the market and a fuller team to accelerate our time to market," he said.

The Beceem deal "is not a big surprise--it was well known Broadcom was looking for a 4G core," said Eran Eshed, co-founder and vice president of marketing at Altair Semiconductor, an LTE startup with a two-chip set now in production. "Broadcom did due diligence on pretty much any company that had to do with LTE," Eshed said.

Eshed characterized Beceem as a WiMax company that doesn’t have a good LTE position.

"The mobile business unit on Broadcom is not very profitable, so having Beceem's revenues makes it an easier buy for them, but there's not a strong technology angle behind the deal," he added.

For Beceem the $316 million acquisition is clearly sweeter than an estimated $100 million IPO. Remaining startups like Altair hope both acquisition and IPO prices soar as the LTE market grows.

Broadcom's views and strategy in LTE

Typical of the company, Broadcom does not expect to be among the first with LTE. Its focus is on providing integrated parts for more mature, high volume markets.

Some of Beceem's WiMax customers will transition to LTE, Bibaud said.

"We aren’t going to be in the first phase of [LTE] solutions that ship later this year, but as the market becomes bigger and more mature we will have a differentiated set of solutions that let us get in there," Bibaud said. Some of Beceem's WiMax customers eventually will transition to LTE, he added.

As of June 2010, more than 590 4G-WiMax networks have been deployed globally, according to the WiMax Forum. All major GSM and CDMA cellular are expected to transition to LTE eventually.

Carriers are starting to turn on their LTE networks now. The first consumer products are data cards, dongles and gateways for PCs.

"We don’t think LTE in mobile phones will be significant until at least 2015," said Bibaud, downplaying a market where rivals such as Qualcomm and Samsung will be early entrants.

"But we think [LTE] will get big faster than most market analysts predict today," Bibaud said. "We see a lot of carriers have incentives to move into LTE very rapidly," he added.

Broadcom plans to support TD-LTE, a variant for the China market. Startup Sequans is already supplying TD-LTE chips that China Telecom is demonstrating.

Other established LTE players include Intel--through its recent acquisition of Infineon's wireless group--as well as ST-Ericsson and MediaTek. LTE chip startups also include Altair, BitWave, Comsys and Wavesat.

"Samsung is the only company shipping LTE modems in quantity," said Will Strauss, principal of market watcher Forward Concepts. "All of the current WiMax chip suppliers, including Sequans, are morphing into LTE," he added.

"Their LTE silicon is not competitive, so they will have to transition to different silicon going forward," said Eshed of Altair.

Samsung's chips are shipping in its own handsets. The Korean giant wanted to own patents on LTE and be an early player in devices, but long term it has little interest or background in being a cellular modem provider, he added.

As LTE matures, Intel will become more of a head-to-head competitor with Broadcom and Qualcomm for cellphone silicon, said Bibaud. The PC giant has long been public about its plans to merge future versions of Atom with 4G modems and other blocks for integrated chips aimed at smartphones and tablets.

At its quarterly earnings call yesterday, Intel chief executive Paul Otellini said the company will stake out a significant and profitable business in tablets. He also said Intel plans to integrate Infineon's wireless modems with Atom over the next three or more years.

"What they have been doing in WiMax has been focused on PC integration," said Bibaud. "I think Intel has a lot to learn to become a real mobility company delivering cellular modems—it's not something they've been successful with in the past," he said.

Craig Berger of FBR Capital Markets ranks Intel as a third LTE chip competitor behind Qualcomm and ST-Ericsson.

"The Infineon wireless group has a strong 2G and 3G product offering and a solid 4G roadmap, however we believe Intel's execution outside of its core CPU market remains a show-me story," Berger said in a research note. "We believe Broadcom is acquiring Beceem at a very reasonable price when one considers the firm's 4G portfolio offering and the competitive landscape for 4G chips," he added.

Nevertheless, Berger ranked Broadcom fifth among LTE competitors behind Qualcomm, ST-Ericsson, Intel and MediaTek. Marvell has announced plans for LTE chips but has yet to ship them, he noted.

In a broad interview at last year's Consumer Electronics Show, Broadcom's chief executive Scott McGregor said the company's strategy is to quickly integrate into SoCs many of the key ingredients its OEM customers need for high volume systems. The approach is working sometimes to the dismay of customers who want to drive to lowest cost silicon, according to Berger.

"Recent conversations with strategic technologists at Samsung and Nokia suggest that Broadcom is becoming a more strategic supplier to these OEMs," Berger wrote. "One contact said Broadcom has the best products, the fastest integration, and is moving the markets forward in technological capabilities, thus forcing this OEM to use Broadcom more despite inflexible pricing policies," he added.

Eshed of Altair estimates the market for LTE chips this year at a few hundred thousand units. Next year, that could soar to five million, he said.