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There are three major components that a silicon vendor needs to be able to provide in order to have a complete platform for smartphones. The first is the apps processor. This is the sexiest and most visible part of the solution. It includes the main processor, graphics engine, image signal processor, and so on. It's what controls the raw performance of the device. Next is the connectivity -- this includes Wi-Fi, GPS, Bluetooth, and NFC. Finally, and this one is arguably the most difficult for many players, is the cellular baseband processor and the accompanying RF front end.
Qualcomm (NASDAQ: QCOM ) is the undisputed leader in cellular silicon. With no real competition in LTE baseband, it owns the vast majority of the smartphone silicon content -- a result of Qualcomm's ability to integrate cellular baseband, apps processor, and connectivity onto a single piece of silicon. However, today a new challenger, silicon powerhouse Intel (NASDAQ: INTC ) made some pretty important announcements.
Intel shipping LTE today
Intel announced its XMM 7160 LTE slim modem today. This platform consists of an LTE transceiver as well as an LTE baseband -- think of the transceiver as the "antenna" and the baseband as what processes the signals. While the XMM 7160 doesn't quite sport the feature set for leading-edge smartphones -- features such as LTE-Advanced, carrier aggregation, and so on -- it should finally allow competition in the mid-range and portions of the high end. That being said, it's not likely that Intel really expects to sell too many of these parts.
LTE-Advanced coming in first half of 2014
At today's disclosure, Intel announced that its next-generation modem, the XMM 7260, would be shipping in devices beginning in the first half of 2014. The baseband and accompanying RF are built on the more advanced TSMC 28-nanometer process as opposed to the 40-nanometer process for baseband and 65-nanometer for RF, as is the case with XMM 7160 platform. With this first-half release, Intel should more or less hit headline feature parity -- LTE-Advanced, Cat. 6, TD-SCDMA, carrier aggregation -- with Qualcomm. This will also mean that, for the first time, Intel will be able to pair what will likely be an excellent applications processor -- codenamed "Merrifield" -- with a cellular platform that can do the trick.
While it's a tad frustrating to see Intel still a ways out with an integrated baseband and apps-processor solution, this is mostly important in the low end, where saving every penny counts, even though this is where much of the volume growth is. Eventually, such integration will be required at the high end, but today's top-tier phones such as Apple's iPhone come paired with discrete basebands and still offer excellent cellular performance and battery life. If Intel can make meaningful inroads with its Merrifield platform in higher-end phones from HTC, LG, and Lenovo, then the XMM 7260 will be considered a success.
What about other players?
Intel seems to be leading the valiant charge to be the second source player in this market, but other players want in. Samsung, of course, is trying to get its own baseband efforts working, with Silicon Motion providing the RF transceiver. That could threaten Qualcomm, as 90% of Samsung's LTE phones come paired with Qualcomm silicon today. Broadcom, (UNKNOWN: BRCM.DL ) has been making a heated pass at this market, albeit with plenty of setbacks along the way. It should be in the market with an integrated low-end apps processor and baseband by the beginning of 2014, and with a discrete modem by the second half of 2014. NVIDIA, too, intends to play in this space thanks to the technology it acquired -- and continued to develop -- from Icera.
Foolish bottom line
By getting up to speed on modem technology, Intel finally opens itself up to the massive smartphone silicon market -- one in which it does not meaningfully play today outside of 3G chips, for which demand is rapidly falling. With a solid modem and apps processor, it is finally poised to take share in smartphones. How much it takes, and over what period of time it does it, remains to be seen. But if Intel can get off to a good start and keep running with it, then there's very little reason for Intel to not trade higher over the coming years.
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