OYSTER BAY, N.Y--Wireless-chip set vendors face a rapidly evolving market that is going to lead to consolidation among the makers of handset ICs, according to a new report from Allied Business Intelligence (ABI) here.
Increasingly, technology alone is not the market differentiator, according to the technology market research. In the first generation of handsets, the radio-frequency (RF) expertise was mostly in the hands of the phone suppliers such as Nokia, Ericsson, and Motorola, said
Andy Fuertes, vice president of communications technologies of ABI and author of the report.
"Now the game is changing," he said. "RF is in the hands of the chip makers. Leading phone builders, as well as potential handset vendors are trying to focus on their true value in the supply chain. They are finding more often than not that true value is in aesthetics, branding and distribution, not necessarily in radio design. The manufacturing and development of the radio technology is being pushed down to the component suppliers."
Fuertes said more consumer electronics companies such as Siemens AG and Sony Corp. are entering the phone fray, and there are other eager entrants from the networking world. The third-generation (3G) cellular technology, which includes wireless Internet access, "is seen almost as computing platform," Fuertes said. "As data-enabled phones become prevalent, software and interface will join the list as differentiators."
As a result, he said, handset makers will look more and more to chip suppliers for complete solutions. This will drive more of the specialized companies into partnerships or mergers, Fuertes explained.
Conexant Systems Inc. and Qualcomm Inc. already offer the most complete solutions, he said. Qualcomm, however, outsources much of its own manufacturing and development, the analysts added.
Companies with specialized RF technologies must adapt to survive, urged Furetes. He cited RF Micro Devices, TriQuint, Anadigics, Alpha Industries, and PrairieComm.
"Low margins among leading manufacturers and demand for complete solutions amongst all handset suppliers have made this the opportune time for mergers and acquisitions amongst handset IC vendors," Fuertes said. "As a result, we expect consolidation in the handset IC market."