February 26, 2013
N. Quinn Bolton, CFA • [email protected] • 212-705-0322
Communication ICs
Summary of Important Announcements at Mobile World Congress A few “Chip Level” takeaways from MWC
Industry Note – Given the flurry of product announcements ahead, and during Day 1, of Mobile World Congress, we thought it would be appropriate to shed some light on what we see as key developments relating to our Communication IC coverage universe.
Companies Under Coverage: ANAD: ProEficient Solution to Power Samsung Galaxy Music Duos and Chat BRCM: 4G LTE-Advanced modem combines two LTE carriers to deliver speeds of 150Mbps BRCM: HTC chooses Broadcom 5G WiFi technology in its newly launched HTC One smartphone BRCM: Broadcom and Radisys collaborate on 4G LTE small cells for multiple markets BRCM: Boosts 4G LTE mobile backhaul capacity by 50% with new microwave SoC solution BRCM: Broadcom expands multi-mode 3G/4G LTE small cell offering CAVM: Huawei selects Cavium’s PureVu CNW6611L for its AirSharing AM02 wireless media adaptor CAVM: LG U selects Cavium's OCTEON Fusion for powering its small cell deployment for LTE INTC: Intel introduces company’s first dual-core application processors for smartphones INTC: Intel announces multi-mode baseband solution, XMM7160, supporting LTE / DC-HSPA+ / EDGE MRVL: Baidu rolls out first commercial deployment of servers based on Marvell’s ARM processors MSPD: Mindspeed announces next generation Transcede SoCs for Metro/Premium Enterprise small cell applications MSPD: Radisys and Mindspeed continue small cell leadership with industry's first LTE-A small cell demonstration MSPD: Mindspeed and Aricent announce launch of High-Performing 20MHz small cell reference solution PSMI: Peregrine Semi expands second generation DTC product family PSMI: Peregrine’s third generation antenna tuning solutions selected by Intel for its LTE platform reference design PSMI: Peregrine announces STeP8 UltraCMOS(r) process technology RFMD: RFMD announces envelope tracking product family including power management ICs, single-mode PAs and multi-mode, multi-band (MMMB) PAs RFMD: RFMD expands multi-mode, multi-band power amplifier family; announces compatibility with major basebands SQNS: 3rd Gen Streamrich LTE 4G LTE-Advanced chip to sample next quarter; enables 20MHz+20MHz carrier aggregation SQNS: Sequans completes interoperability testing of its eMBMS-capable LTE chipsets with Alcatel Lucent’s LTE infrastructure equipment SWKS: SWKS announces initial SkyOne Design wins TQNT: TriQuint announces two new multi-band, multi-mode power amplifiers (MMPAs) TQNT: TriQuint announces High-Performance Duplexers for 3G/4G smartphone bands
Companies Out of Coverage: Alcatel-Lucent and China Mobile accelerate deployment of 4G TD-LTE across China Texas Instruments announces dual-mode WCDMA/LTE small cell basestation design win at ZTE with its Keystone multi-core small cell SoC Qualcomm demonstrates carrier aggregation technology at MWC Qualcomm formally announces its entry into the RF front-end segment ST-Ericsson announces THOR M7450 LTE Advanced Modem
Anadigics – ANAD - ANADIGICS' ProEficient Solution to Power Samsung Galaxy Music Duos and Chat o We believe this is a good design win for ANAD, and especially important in that the PA is for WCDMA/UMTS band 1 (2100MHz) rather than CDMA (e.g., Verizon or Sprint), which has been ANAD’s historical sweet spot. o UMTS market opportunity is much larger than CDMA market opportunity, and should provide meaningful revenue upside.
Broadcom – BRCM - 4G LTE-Advanced modem demo combines two LTE carriers to deliver Category 4 downlink speeds of 150Mbps - the BCM21892 o This represents the first thin modem solution offered by BRCM in some time (most of BRCM’s recent solutions have combined modem and app processor in a single cellular SoC, targeting mainstream and low-cost market segments) o The BCM21892 LTE modem also incorporates envelope tracking, resulting in lower power consumption and better battery life o We believe this solution is targeted at the high-end of the market (e.g., major platforms such as Samsung GS4 and Apple iPhone) that historically have used internally designed application processors. o BRCM is now one of only five vendors on the market to have announced a Release 10/LTE-Advanced modem with carrier aggregation. The others are Altair, Qualcomm, ST-Ericsson and Sequans (at least that we know of).
- HTC chooses Broadcom 5G WiFi technology in its newly launched HTC One smartphone – the BCM4335 o While the HTC One is not the Samsung Galaxy S4 or Apple iPhone, we believe this is an important win for BRCM as it is the first major smartphone platform to adopt 802.11ac. o We fully expect BRCM’s BCM4335 solution to be adopted by both Samsung and Apple in the next generation Galaxy S4 and iPhone 5S platforms later this year. o 5G WiFi, based on 802.11ac, improves the range of a wireless connection, provides higher-capacity video streaming, the ability to connect multiple devices to the network at the same time and broader coverage with fewer dead spots. o It also reduces power consumption by up to 83%
- Broadcom and Radisys Collaborate on 4G LTE Small Cells for Residential, Enterprise and Public Access Markets o Broadcom has integrated Radisys' 4G Trillium® LTE TOTALeNodeB software into its 4G LTE small cell modems, including the BCM616730 for residential small cells, the BCM616750 for enterprise small cells and the BCM616760 for high- capacity metro nodes. o These LTE small cell basestation SoCs will compete with Mindspeed’s Transcede product family. o Investors should note MSPDs Transcede LTE basestation SoC was announced two years ago. o Like Mindspeed, Broadcom has partnered with Radisys for the LTE software protocol stack. o BRCM’s small cell solutions are now sampling, with volume production expected in Q2 2013.
- Broadcom announces broad adoption of its Miracast solutions o BRCM’s solution consists of a WiFi solution and media processor, and competes directly with Cavium’s PureVu solution (see CAVM product below, which uses a Qualcomm Atheros WiFi component) o Right now, CAVM seems to have most of the market momentum, having announced PureVu-based wireless HDTV adapters with OEMs including HTC, Samsung, LG, Huawei and NEC, among others.
- Broadcom Boosts 4G LTE Mobile Backhaul Capacity with New Microwave SoC Series o BRCM’s solution is a complete baseband and RF chipset optimized for high- bandwidth data requirements
2 An Investment Analysis by Needham & Company, LLC o Series includes a powerful multi-core SoC to maximize throughput capacity o This solution increases the bandwidth capability of microwave backhaul equipment by 50%...better backhaul means faster networks… o We think BRCM remains the merchant leader in modems for cellular backhaul applications
- Broadcom introduces 3G/4G LTE multi-mode small cell offering o BRCM announced new family of dual-mode (WCDMA and LTE) small cell basestation SoCs… o We expect them to compete with Mindspeed’s dual-mode Transcede offerings
Cavium – CAVM - Huawei's AirSharing AM02 wireless media adapter to use Cavium's PureVu CNW6611L media SoC o Huawei selected CAVM’s CNW6611L Media SoC for its AirSharing AM02 product which will offer wireless display and home media streaming capabilities o The release of the CNW6611L will coincide with the introduction of Huawei's new Ascend Mate smartphone o Cavium adds Huawei to its impressive list of PureVu-based wireless display adapters o We believe CAVM has most of the market momentum having announced PureVu-based wireless HDTV adapters with OEMs including HTC, Samsung, LG, Huawei and NEC among others.
- LG U, a large Korean communication service provider, selects Cavium's OCTEON Fusion® for powering their small cell deployment for LTE. o Cavium’s OCTEON Fusion will allow for faster deployment and greater LTE coverage in rural and metro areas, with fewer small cells
Intel – INTC - INTC introduces new 32nm “Clover Trail+” Atom SoCs and highlights forthcoming 22nm “Merrifield” Atom SoC o Intel announced its second-generation 32nm dual-core Atom processor platform ("Clover Trail+") and smartphone reference design. The new processors offer double the compute performance and three times the graphics performance over the first generation 32nm Atom processors. o Clover Trail+ Atom SoCs (Z2580, Z2560, Z2520) are available in speeds up to 2.0 GHz, 1.6 GHz and 1.2GHz, respectively, and feature support for Intel Hyper- Threading Technology, supporting four simultaneous application threads. o Customers announcing support for "Clover Trail+" platform for phones and tablets include ASUS, Lenovo and ZTE. o Intel also highlighted its forthcoming 22nm smartphone Atom SoC ("Merrifield"). The product is based on Intel’s leading-edge 22nm process and an entirely new Atom microarchitecture that will help enable increased smartphone performance, power efficiency and battery life.
- INTC announces XMM7160 LTE / DC-HSPA+ / EDGE baseband o The 7160 global modem supports 15 LTE bands simultaneously. o XMM7160 baseband specs are limited, but it does not appear that this baseband supports Release 10/carrier aggregation. o It does however support envelope tracking and antenna tuning, which should increase the momentum for these new technologies over the next couple of years. o Intel is currently shipping its single mode 4G LTE data solution and will begin multimode shipments later in the first half of this year.
Marvel – MRVL - Baidu rolls out “Baidu Cloud,” the world’s first commercial deployment of servers based on Marvell’s ARM processors o We see this as a good design win for MRVL given that its ARM CPU is being used in a real-world application by a leading Internet company. o However, investors should note that this is a 32-bit ARM processor, not a 64-bit ARM processor.
An Investment Analysis by Needham & Company, LLC 3 o While we see this as a good win, we continue think the number of applications for 32-bit ARM processors remains limited. o We see a positive as the transition to low-power, cost effective data center solutions is becoming a reality
Mindspeed Technologies – MSPD - Mindspeed Announces Next Generation Transcede SoCs for Metro and Premium Enterprise Small Cell Applications o MSPD announced the third generation of its Transcede® family of baseband processors. o The first products of the new generation are the T4400, which extends the product family to address higher capacity metrocell class small cells, and the T3400 for premium enterprise and lower performance metrocells. o The new products support dual-mode capability, allowing both LTE (either LTE FDD or TD-LTE) as well as simultaneous 3G (either HSPA or TD-SCDMA). o The solutions support 3GPP Release 10 (LTE-A) and have a roadmap to Release 12 (LTE-B). o The T3400 supports 200 LTE users and 64 HSPA+ users, with 2x2MIMO with 40MHz channels. The higher performing T4400 supports up to 400 plus users in LTE mode and 128 users in HSPA+ mode, and is capable of 4x4 MIMO with 80MHz channels.
- Radisys and Mindspeed Continue Small Cell Leadership with Industry's First LTE-A Small Cell Demonstration o MSPD and Radisys demonstrated a small cell with carrier aggregation, connected to two radios at 700MHz and 2.6GHz carriers, but combining them into a single connection to the core network. o We believe this is the first commercial demonstration of an LTE-Advanced small cell basestation. o The demonstration ran on Mindspeed's Transcede T3300 baseband processor.
- Mindspeed and Aricent Announce Launch of a High-Performing 20MHz Small Cell Reference Solution o MSPD announced a next gen, high-performance metrocell reference design which incorporates Aricent’s software stacks and Mindspeed’s PYH software. o Solution supports 20MHz LTE FDD and throughputs of up to 150Mbps o MSPD has partnered with multiple software stack vendors to provide flexibility and choice to OEMs. o MSPD currently has 34 LTE small cell design engagements, and is one of the first small cell SoC companies to have commercial deployments of LTE systems
Peregrine Semi – PSMI - PSMI expands second generation DTC product family o PSMI has expanded its DuNE™ Digitally Tunable Capacitor (DTC) product line with six second-generation devices for antenna tuning in 4G LTE smartphones. o Antenna tuning should become a meaningful segment of RF front-end over the next 2-3 years.
- PSMI’s third generation antenna tuning solution selected by Intel for its LTE platform reference design o Good design win for PSMI’s DuNE LTE tuning solutions o The tuning solution utilizes Peregrine’s third generation tuning products, which feature multidimensional tuning capabilities o We view this as an important reference design win for PSMI as Intel basebands are used by many leading OEMs, of which Samsung is the most important. o We estimate the ASP on the third generation antenna tuners are likely in the $1.00 to $1.00+ range.
- Peregrine announces STeP8 UltraCMOS Process Technology o PSMI announces its STeP8 process, which offers die size and performance benefits relative to its current STeP5 process in production o ROn/COff performance is expected to be improved 36% over current STeP5
4 An Investment Analysis by Needham & Company, LLC o We believe this will enable PSMI to maintain its performance leadership position in the RF switch market
RF Micro - RFMD - RFMD announces the addition of multiple new products o A family of envelope tracking (ET) power management devices, single-mode PAs and multi-mode, multi-band (MMMB) PAs.
- RFMD expands multi-mode, multi-band power amplifier family o RFMD introduces RF7388 3G/4G MMMB PA, and says family is now compatible with all leading basebands o Unfortunately compatibility does not imply a reference design win. o As such, RFMD will have to continue to market directly to OEMs to get these components designed into phones.
Sequans – SQNS - 3rd Gen Streamrich LTE 4G LTE-Advanced chip to sample next quarter o The company’s 3rd gen LTE platform solution, the SQN3220, is an extremely flexible carrier aggregation solution, allowing the aggregation of any 2 carriers up to 20MHz of spectrum each. o What is important to note is that the SQNS solution enables the aggregation of two separate bands of up to 20MHz each, (e.g. 10MHz + 15MHz, or 5MHz +15MHz, or 10MHz + 20MHz), whereas QCOM, STE and BRCM only allow aggregation of two separate bands of up to 10MHz each. o Accordingly, SQNS solution offers greater flexibility to carriers than do competing solutions. o SQNS will begin LTE-Advanced trials with operators (sampling) next quarter o With this, SQNS becomes one of only five suppliers with 3GPP Release 10/Carrier Aggregation silicon. o It is conducting interoperability testing and performance optimizations in collaboration with infrastructure vendors and test equipment suppliers, such as Agilent Technologies
- SQNS completes interoperability testing of its eMBMS-capable LTE chipsets with Alcatel Lucent’s LTE infrastructure equipment o Verizon seems very interested in eMBMS (see below for definition) or Video Broadcast, and Alcatel Lucent is one of Verizon’s key LTE equipment vendors. o The successful interoperability (IOT) testing with ALU helps validate the SQNS solution and may help accelerate design wins with OEMs o eMBMS (evolved multimedia broadcast multicast service), aka. LTE Broadcast, is a mobile video delivery technology which enables mobile operators to reduce the cost of delivering high-bandwidth content to multiple users at one time over LTE networks.
Skyworks – SWKS - SWKS announces initial SkyOne Design wins o SkyOne integrates all RF front-end components from antenna to transceiver in a single module, reducing complexity, size and time-to-market. o The initial SkyOne modules integrate support for quad-band EDGE and penta- band UMTS 3G/4G. o SWKS previously stated that it is in various stages of qualification with three separate OEMs for SkyOne and that SkyOne is expected to ramp over the course of 2013. o While SkyOne has been previously discussed by Skyworks, this announcement provides a more definitive update on design wins and ramp timing.
TriQuint – TQNT - TQNT announces two new multi-band, multi-mode power amplifiers (MMPAs) o The TRIUMF TQM7M9050 solutions support five of the most popular 3G and 4G frequency bands in addition to legacy quad-band GSM/EDGE frequencies.
An Investment Analysis by Needham & Company, LLC 5 o They are included on a leading chipset reference design and have already captured design wins in 3G and 4G LTE smartphones due to the longer battery life they enable, and support more frequency bands in 20% less silicon than discrete solutions. o These solutions should be significant for TQNT beginning in 2H13
- TQNT Announces High-Performance Duplexers for 3G/4G smartphone bands o TQNT has leveraged its filter technology to develop a new family of high- performance duplexers. o TQNT’s BAW and SAW filters enable simultaneous voice and data for 3G / 4G smartphones, particularly in RF bands with complex performance requirements. o TQNT’s new TQQ2526 duplexer bank leverages both filters, BAW to support Band 25 and SAW to support Band 26 in the North American market. o The TQQ2526 module integrates two duplexers into a single solution, providing extended frequency range and requiring less board space.
Names outside of our Coverage - Alcatel-Lucent and China Mobile accelerate deployment of 4G TD-LTE across China o Alcatel-Lucent and China Mobile will announce new product within the lightRadio™ family o This accelerates deployment of 4G TD-LTE technology across China, the largest mobile market in the world o A positive development for the small cell BTS market as China Mobile is the world’s largest carrier
- Texas Instruments announces dual-mode WCDMA/LTE small cell basestation design win at ZTE with its Keystone multi-core small cell SoC… o Looks like the market for dual-mode (WCDMA/LTE) small cell SoCs is heating up…
- ST-Ericsson Announces THOR M7450 LTE Advanced Modem o ST-Ericsson’s M7450 LTE Advanced modem has 10 flexible RF ports enabling more than 17 frequency bands. o The solution also supports 3GPP Release 10 carrier aggregation.
Qualcomm – QCOM - Qualcomm demonstrates carrier aggregation technology at MWC o In conjunction with Sierra Wireless and Ericsson, QCOM demonstrated LTE carrier aggregation and Category 4 data rates. o Other suppliers that support LTE-Advanced/3GPP Release 10/Carrier Aggregation include Altair, Broadcom, ST-Ericsson and Sequans.
- Qualcomm formally announced its entry into the RF front-end segment
Bottom Line: Qualcomm formally announced its entry into the RF front-end segment just ahead of MWC. Though we believe the actual revenue impact to existing RF front-end suppliers such as Skyworks (SWKS, Hold), Peregrine Semiconductor (PSMI, Buy), RF Micro Devices (RFMD, Buy), TriQuint Semiconductor (TQNT, Hold), ANADIGICS (ANAD, Buy) and RDA Microelectronics (RDA, Buy) will be limited over the next twelve months, we do believe Qualcomm’s entry represents a significant overhang on the group and will likely pressure multiples across the segment.
Summary: Qualcomm formally entered the RF front-end with the announcement of its RF360 front- end chipset solution and new WTR1625L RF transceiver. The RF360 chipset includes the following solutions:
Dynamic Antenna Matching Tuner (QFE15xx) – The world’s first modem-assisted and configurable antenna-matching technology extends antenna range to operate over 2G/3G/4G LTE frequency bands, from 700-2700 MHz. This, in conjunction with modem
6 An Investment Analysis by Needham & Company, LLC control and sensor input, dynamically improves the antenna’s performance and connection reliability in the presence of physical signal impediments, like the user’s hand.
Envelope Power Tracker (QFE11xx) – The industry’s first modem-assisted envelope tracking technology designed for 3G/4G LTE mobile devices, this chip is designed to reduce overall thermal footprint and RF power consumption by up to 30 percent, depending on the mode of operation. By reducing power and heat dissipation, it enables OEMs to design thinner smartphones with longer battery life.
Integrated Power Amplifier / Antenna Switch (QFE23xx) – The industry’s first chip featuring an integrated CMOS power amplifier (PA) and antenna switch with multiband support across 2G, 3G and 4G LTE cellular modes. This innovative solution provides unprecedented functionality in a single component, with smaller PCB area, simplified routing and one of the smallest PA/antenna switch footprints in the industry.
RF POP™ (QFE27xx) – The industry’s first 3D RF packaging solution, integrates the QFE23xx multimode, multiband power amplifier and antenna switch, with all the associated SAW filters and duplexers in a single package. Designed to be easily interchangeable, the QFE27xx allows OEMs to change the substrate configuration to support global and/or region-specific frequency band combinations. The QFE27xx RF POP enables a highly integrated multiband, multimode, single-package RF front end solution that is truly global.
Needham’s take: Limited to no revenue impact on PA/switch vendors over next 12 months. Based on our conversations with industry participants, Qualcomm has been sampling this chipset since last summer. We believe Qualcomm has designed its own CMOS PA and SiGe antenna switch rather than sourcing these components from existing suppliers. We do believe Qualcomm is likely sourcing the SAW and BAW filters/duplexers from incumbent suppliers. Our understanding is that actual customer interest has been lukewarm at best as the RF performance of the CMOS PA is not as good as the performance of traditional GaAs PAs. We have also heard that Qualcomm’s ET power management device is late. As the envelope tracking power management improves the performance of the CMOS PA, we believe it unlikely that the rest of Qualcomm’s RF front-end solution will be selected without the ET power management device. As such, we do not expect significant adoption of Qualcomm’s solution in 2013 and believe there will be limited to no impact near-term on the revenue of traditional PA suppliers.
Nevertheless, we expect Qualcomm’s entry to represent a significant overhang on the group. Though we expect Qualcomm’s entry will have limited revenue impact to existing suppliers near term, we believe Qualcomm’s entry into the RF front-end creates a significant overhang on the entire segment. Qualcomm’s system level solution addresses two significant challenges presented by LTE, namely frequency band fragmentation and inherently low power efficiency of LTE modulation. While current performance of Qualcomm’s solution may need to be improved in subsequent generations, ultimately we believe handset OEMs will adopt Qualcomm’s RF front-end chipset. Historically, Qualcomm has achieved very high attach rates for solutions that support its basebands.
Greatest threat to LTE segment (e.g. high-end) of the market. As functions such as antenna tuning and envelope tracking provide the greatest benefit to LTE handsets, we expect Qualcomm’s solution will effectively target the high-end of the market. While Qualcomm may try to sell the QFE2300 and QFE2700 solutions into the low-cost WCDMA segment, we are not sure that Qualcomm will offer any significant advantages (either in performance or cost) in this segment. As such, we believe Qualcomm’s entry may have less impact ultimately on companies such as RFMD and RDA that have more exposure to the low-end 3G entry segment than on companies such as SWKS that derive meaningful revenue from high-end smartphones.
Limited impact on filter suppliers. As we believe QCOM is likely sourcing filters and duplexers from existing suppliers, we believe QCOM’s entry will have limited impact on the filter market as a whole. Clearly, those filter suppliers that partner with QCOM are likely to benefit.
An Investment Analysis by Needham & Company, LLC 7 ANALYST CERTIFICATION
I, N. Quinn Bolton, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject company (ies) and its (their) securities. I also certify that I have not been, am not, and will not be receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report.
Disclosures applicable to Ambarella Inc. (AMBA/NASDAQ): B, C, D, G, J.
Disclosures applicable to Broadcom Corporation (BRCM/NASDAQ): B, G.
Disclosures applicable to Cavium, Inc. (CAVM/NASDAQ): B, G.
Disclosures applicable to Intel Corporation (INTC/NASDAQ): B, C, D, G, J.
Disclosures applicable to Marvell Technology Group Ltd. (MRVL/NASDAQ): B, G.
Disclosures applicable to Mindspeed Technologies, Inc. (MSPD/NASDAQ): B, D, G, J.
Disclosures applicable to Spreadtrum Communications, Inc. (SPRD/NASDAQ): B, G.
Disclosures applicable to RDA Microelectronics Inc. (RDA/NASDAQ): B, G.
Disclosures applicable to Skyworks Solutions, Inc. (SWKS/NASDAQ): B, G.
Disclosures applicable to Peregrine Semiconductor Corp. (PSMI/NASDAQ): B, C, D, G, J.
Disclosures applicable to RF Micro Devices, Inc. (RFMD/NASDAQ): B, G.
Disclosures applicable to TriQuint Semiconductor, Inc. (TQNT/NASDAQ): B, G.
8 An Investment Analysis by Needham & Company, LLC
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An Investment Analysis by Needham & Company, LLC 9
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OPTIONS ARE NOT SUITABLE FOR ALL INVESTORS. For further information on the risks associated therewith, please consult the Options Clearing Corporation’s options risk disclosure document available at the following web address: http://www.optionsclearing.com/about/publications/character-risks.jsp
Clients should call the Equity Options Sales and Trading Desk (212-705-0369) for additional information.
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10 An Investment Analysis by Needham & Company, LLC