SAN MATEO, Calif. Although the market for high-bandwidth wireless telephony technology is still years from wide-scale deployment, chip vendors are starting to maneuver for key positions now. A pair of acquisitions this past week drove home this point, as both Texas Instruments Inc. and PMC-Sierra Inc. snapped up smaller digital signal processor vendors that focus on technologies key to implementing a wireless broadband network.
TI, already on the acquisition path this summer, announced Thursday (June 29) that it will buy Dot Wireless Inc., a privately-held developer of DSP chips for third-generation (3G) wireless code-division multiple-access technology, for $475 million in stock. The move strengthens TI's position in CDMA, already bolstered by its recent purchases of analog-component maker Burr-Brown Corp. (Tucson, Ariz.) and wireless LAN provider Alantro Communications Inc. of Santa Rosa, Calif.
And on Wednesday (June 28), PMC-Sierra announced the acquisition of fabless DSP chip company Datum Telegraphic in a stock transaction valued at more than $122 million. This is PMC-Sierra's third purchase this year of a DSP supplier, boosting its presence in the cellular basestation market. In January the Burnaby, British Columbia, company picked up Toucan Technology, an Irish firm focused on telecommunications DSP chips. And just last month the company acquired voice-processor DSP vendor Malleable Technologies (San Jose, Calif.).
Jockeying for position
Will Strauss, president of market research firm Forward Concepts (Tempe, Ariz.), said both Datum and Dot Wireless offer key technologies for the 3G cellular telephone market, but pointed out there is little expectation that high-bandwidth wireless data services will ship in volume for several years. "Right now there is no international standard for 3G service, and we do not expect to see any shipments in volume until at least 2005," Strauss said. "What these companies are doing now is jockeying for position."
PMC-Sierra's deal for Datum (Vancouver, British Columbia) will garner a key technology that can dramatically cut the costs of installing cellular basestations. Glenn Bindley, vice president and general manager for PMC-Sierra's access products division, said Datum has developed a technique that allows a DSP chip to distort a data signal before it is fed through the power amplifier and transmitted.
Current amplifiers distort these signals, which limits the effective frequency range they can utilize and thus limits bandwidth. The Datum technique carefully distorts the signal earlier in the process, so the amplifier-added distortion has the effect of cleaning up the signal and therefore increasing the usable frequency range.
While this will not increase the total bandwidth available from a basestation, it will require far fewer systems to support the total bandwidth.
"This is the power amplifier equivalent of using a pair of glasses, to distort the signal into something that is more usable," said Bindley.
Datum currently has this technology working in a lab setting, using FPGA chips. PMC-Sierra expects to turn it into a single-chip product that it expects to sample later this year. Bindley said that Datum already has several patents for the concept, and said he knows of no other company even attempting to pursue the idea.
While PMC-Sierra hopes to create a new market, TI is focusing on establishing itself in an existing space. The Dallas-based chip giant said it would use the purchase of Dot Wireless (San Diego) to create a CDMA technology stronghold near its wireless customers and other wireless technology clustered there, such as CDMA pioneer Qualcomm Inc.
Dot Wireless' IS-95A/B and IS-2000 CDMA chip sets, software and transceiver reference designs, as well the valuable CDMA engineering talent among its staff of 75 employees, could give TI a leg up in the race to market with 3G CDMA silicon. TI's Gilles Delfassy, vice president and manager of worldwide communications, said the acquisition was mostly about recruiting very hard-to-find CDMA engineers.
"There are only a few hundred engineers in that domain and some of these Dot Wireless guys include some of the founders of Qualcomm it is one of the deepest pockets of CDMA talent," Delfassy said.
Asked about the value proposition of $475 million for 75 bodies, he called it a "bargain" it if gives TI a faster time-to-market. "TI is in a very strong cash position and is willing to do whatever it takes to succeed in wireless," Delfassy said.
He promised that new products developed by the combined companies will be available in the first half of next year.
Both TI and PMC-Sierra clearly have an eye on the emerging market for higher-bandwidth cellular applications. Although there is no international standard yet for the 3G market, analyst Strauss said the general consensus is that it is almost certain to be some type of spread-spectrum transmission, which uses several frequencies bundled together to allow more data to be transmitted. CDMA, a spread-spectrum format, is one of the leading contenders.
Japan is leading the way in the 3G market, and Japanese vendors are expected to settle on their own domestic standard this year. However, Strauss predicted that the United States and Europe will be slow to follow suit. If that is the case, the TI and PMC-Sierra acquisitions may not bear fruit for some time.
"Besides Japan, nobody is going to make money in the 3G market in the United States or Europe until about 2005," Strauss said.