Pan-Europe Semiconductors (Citi) Industry Focus 29 November 2007 72 pages Integration & consolidation The roadmap for wireless semiconductors 1 Wireless matters in Europe — Our chip company coverage universe has a material Paraag Amin, CFA exposure to the >US$40 billion handset semiconductor market, ranging from 17% +44-20-7986-4080
[email protected] to 65% of revenues. Timothy Shaw1 Moderating handset growth to impact the sector — As emerging market volume +44-20-7986-4199 growth moderates, we expect volume growth for the handset market to move from
[email protected] 23% in 2006 to 9% in 2009. We expect this to increase competition in the Katherine Thompson1 handset sector, which in turn will increase pressure on chip prices. +44-20-7986-4240 Integration the driving force — The trend towards integration of baseband and
[email protected] radio functions onto one chip started a couple of years ago and is gathering pace. Christopher I Vagg1 We see this as a vital skill for chip makers and see Infineon as best placed within
[email protected] our coverage. Further consolidation likely — With a large number of chip suppliers fighting over the Top 5 handset OEMs, we expect further consolidation. We see ST as a potential acquirer (of RF integration expertise) and CSR as a potential target (for its non-cellular RF expertise). Longer-term trends to consider (1) — The move from 3G to 4G cellular technologies will provide a new opportunity for chip makers. Three standards are currently in the running: LTE, UMB and WiMAX. We expect most chip makers to focus on developing LTE solutions, as this is a natural evolution from HSPA.