CFO Gao said Spreadtrum will roll out its WCDMA chip during the fourth quarter.
Spreadtrum’s 2011 acquisition of MobilePeak, a privately held fabless company based here and in San Diego, has allowed it to make inroads in the WCDMA market. MobilePeak, founded by a former Qualcomm senior vice president of engineering, specialized in the design of highly integrated UMTS/HSPA+ modem chip sets.
Gao described MobilePeak as “a company made for us.” MobilePeak offered Spreadtrum a “very efficient and clean design structure,” she added, while the company’s location made it easier for Spreadtrum to absorb MobilePeak’s Shanghai team into the top floors of Spreadtrum’s headquarters located in Zhangjiang Hi-Tech Park.
Asked if Qualcomm will offer a WCDMA chip integrated with a TD-SCDMA baseband, Gao replied that "a multi-standard baseband is not necessary,” because the WCDMA-equipped phones are expected to ship overseas and to China Unicom, where TD-SCDMA is not deployed.
Gao also downplayed the WCDMA market as a must-win for the company, arguing, “Don’t underestimate the importance of the TD-SCDMA market for China Mobile, which has close to 700 million subscribers. That is as big as both the U.S. and European mobile phone subscribers combined.”
Another challenge for Spreadtrum is its smartphone strategy. It introduced a highly integrated, low-power platform for TD-SCDMA mainstream smartphone this year. Designed with a 40-nm CMOS process, a single Cortex A5 1-GHz processor that runs both Android for applications and the RTOS of baseband (supporting multimode TD-HSPA/TD SCDMA/Edge/GPRS/GSM). The chip’s ability to switch between baseband and applications processing functions is viewed as a smart move to bring down the cost of a smartphone platform. While some question how powerful the single core’s performance may be, both K-Touch and Haier in China have announced adoption of Spreadtrum’s new smartphone platform.
On the other hand, critics wonder whether Spreadtrum will ever outgrow its feature phone mentality, to effectively attack the higher-end smartphone market with its combined baseband/apps chip.
Spreadtrum has been growing at a steady clip.
Battle for turnkey solutions
The smartphone battle in China will turn on how well system chip vendors can develop a turnkey system for OEMs/ODMs. MediaTek wrote the playbook, and most everyone is following suit, including Spreadtrum.
In its early days, Gao said Spreadtrum developed not just a reference design but also a complete pc-board with Spreadtrum’s baseband chip, just to earn a tryout from phone companies who were initially leery of Spreadtrum’s baseband chips.
But that means the burden of software development and integration of more components is falling on the shoulders of a chip company.
Practically everyone developing applications processors for smartphones and media tablets – ranging from incumbents like MediaTek, Qualcomm and Marvell to startups such as Nufront, Rockchip and Allwinner – are investing heavily in software development. All are acing to sign up talented software engineers who can write code cheap.
Spreadtrum is right in the middle of this software battle. It now has more than 100 software developers at its Tianjin R&D center. The company also plans to use its future Chengdu R&D center (based on Spreadtrum’s recent acquisition of Chengdu Traicio Co., a Wi-Fi chip company) for more software development.
That reflects the need to reduce its cost structure, which has become the name of the game for every Chinese fabless company.
Gao said the reason Texas Instruments, Freescale and Analog Devices all gave up on baseband development isn’t just the commoditization of baseband chips. Rather, none was able to execute the development of a turnkey solution within a competitive cost structure.
In its second quarter this year, Spreadtrum said its gross margin was 37.1 percent, down from 38 percent from the previous quarter and 42 percent year-on-year. Will this drop further? During the earnings call in August, Gao said, “We believe that our gross margin has now stabilized with the increase in smartphone shipments.”
The Shanghai Integrated Circuit Museum is located at Spreadtrum’s headquarters.
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