Is Qualcomm Safe From Broadcom's Assault?

Just last week, there was speculation that Broadcom (NASDAQ: BRCM  ) might have a chance to score Qualcomm's (NASDAQ: QCOM  ) cushy seat in Apple's  (NASDAQ: AAPL  ) iDevices, after RBC Capital analyst Doug Freedman suggested that the iPhone maker could currently be sampling Broadcom's new BCM21892 baseband for possible inclusion in the 2014 iPhone. The integration of several RF functions could also be appealing, since Apple already buys Wi-Fi combo chips from Broadcom.

Another analyst is chiming in with the belief that Qualcomm may be safe after all.

Town Hall Investment Research analyst Jamie Townsend thinks that Broadcom will have a tough time cracking into the market for discrete LTE baseband chips with multimode functionalities, an area currently dominated by Qualcomm with an overwhelming 86% market share of the 47 million LTE chips shipped in 2012.

Townsend sees Broadcom's new LTE baseband as a move into an already crowded sector facing uphill challenges from incumbents, with an estimated 36 different multimode solutions to compete with. In recent years, several companies have bought their way into the baseband market, including Broadcom, NVIDIA, and Intel (NASDAQ: INTC  ) .

Parent Company

Target

When Completed?

Amount

Broadcom

Beceem

November 2010

$316 million

Intel

Infineon (wireless division only)

January 2011

$1.4 billion

NVIDIA

Icera

June 2011

$367 million

Sources: Broadcom, Intel, and NVIDIA.

All three of these companies have leveraged these acquisitions for key strategic moves recently.

Within the broader baseband market, LTE is driving growth. LTE chip shipments jumped over sevenfold in 2012, according to recent data out of Strategy Analytics. Qualcomm still dominates the overall market, gobbling up over half of all revenue.

2012 Rank

Company

2012 Market Share

1

Qualcomm

52%

2

MediaTek

12.5%

3

Intel

12.3%

Source: Strategy Analytics.

LTE basebands comprised 21% of Qualcomm's total baseband shipments last year, showing how critical the migration to 4G data speeds is to these suppliers.

Since Broadcom's LTE chip isn't expected to ramp up production until 2014, Townsend believes that by then the trend toward integrated basebands will intensify, which will translate into less opportunities for Broadcom.

Apple remains the big fish in the discrete baseband market, and it sounds like Townsend doesn't think Broadcom will be able to score any of Qualcomm's lucrative design wins.

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