The baseband market hasn't seen much change as of late, with Qualcomm (NASDAQ: QCOM ) still far ahead of the competition in terms of revenue share. But this year, rivals Intel (NASDAQ: INTC ) and Broadcom (NASDAQ: BRCM ) could make some small gains against the baseband behemoth and step a bit further into Qualcomm's turf.
Grabbing a piece of the baseband pie
Right now, Qualcomm basically has the baseband market on lockdown. The latest data from Strategy Analytics shows that in Q3 2013, Qualcomm held an amazing 66% of revenue share in the market, followed by MediaTek with 12% and Intel with 7%. Qualcomm gained its lead over the competition partly through its $14 billion investment in research and development over the past four years.
But that's not stopping some analysts from predicting that 2014 could bring a minor baseband shakeup, especially in the lower-end market. Strategy Analytics' Stuart Robinson said just last month that, "Broadcom has the potential to emerge as a key LTE alternative to Qualcomm in 2014."
Just last month, Broadcom announced that it had won Samsung as a customer for its M320 LTE system on a chip. That was obviously good news for the company, but it doesn't mean Broadcom is now a strong competitor in the LTE market. Broadcom's design win is the first step in a long process to deliver baseband chips to major OEMs, and investors will have to wait and see if it can turn the deal into meaningful revenue.
Meanwhile, Intel is making headway in the LTE baseband space as well. Just a few months ago, the company announced that it too was working with Samsung, by shipping its XMM 7160 LTE modem in Samsung's Galaxy Tab 3 in the Asia and European markets. The company is also planning to tap into China's TD-LTE market with its XMM 7260 chip this year, which could help increase its baseband share as well.
Intel's plans don't stop there, though. The company will launch an integrated processor and wireless chip called SoFIA by the end of this year. The goal for the first version of SoFIA is to tackle entry-level smartphones and tablets in emerging markets with its 3G capability, then add LTE capability to the chip in 2015. MKM Partners analyst, Ian Ing, thinks this is how Intel will eventually make most of its gains in the baseband market.
Whether or not the analysts are right in their exact predictions is a bit irrelevant. The bigger picture is that there are emerging baseband players that are looking to take a bigger piece of Qualcomm's revenue share. Whether it's Broadcom, Intel, or one of a handful of smaller players, investors should be looking to see which companies are gaining design wins for their baseband chips. Qualcomm will no doubt remain in the lead throughout 2014, but in the lower-end market, we could see the company cede a bit of its share to smaller competitors. This won't likely change much in terms of revenue for Qualcomm this year, but any progress by its rivals in the highly competitive mobile space shouldn't be taken lightly.
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