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GeeKv2
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Modem doom
GeeKv2   6/3/2014 6:16:57 AM
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Another one bites the dust.

Only a handful of companies are making handset modems today. At this rate of decline, it wont take long before competition gets wiped out. The ones remaining will resort to arm twisting tactics and consumers will suffer.

junko.yoshida
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Re: Modem doom
junko.yoshida   6/3/2014 11:11:16 AM
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Indeed. It goes to show how quickly this celluar market could change. Especially competing in the mid to low-end is getting extremely tough. (Abd of course in the United States where handsets are heavily subsidized by operator, handset solutions could go extremely high-end, which makes it virtually impossible to compete if your chips are not in either Samsung or in Apple.

Scudrunner
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Re: Modem doom
Scudrunner   6/3/2014 11:47:03 AM
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The writing has been on the wall for a while here. I'm sure Apple and Samsung want a good alternative to Qualcomm, but technically they are so far ahead on LTE that nobody (except perhaps Intel) has deep enough pockets to catch up. Eventually. Qualcomm owns developed markets, Mediatek owns emerging (China) markets. Everyone else is bleeding money. Admittedly the move is long term negative for Broadcom's connectivity business but the financial pain was too great - the shares were trading at a significant discount to peers. 

rick merritt
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Re: Modem doom
rick merritt   6/3/2014 4:32:58 PM
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This must be a hard decision as importnat as cellular connectivity will be for thens and hundreds of millions of gadgets for years to come.

tpfj
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CEO
Re: Modem doom
tpfj   6/3/2014 4:44:38 PM
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Unless you are consistently selling >350~450M chipsets a year it is hard to fund the efforts required to maintain the level of complexity that modern cellular modems demand. These extracts from above say it all:

"We don't see enough traction there on the order of 3,000 engineers."

"Eric Brandt, Broadcom's chief financial officer, said the cellular baseband business revenue run rate for the first half of 2014 is between $200 million and $250 million, with gross margins of just tens of millions of dollars."

vickistorm
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Re: Modem doom
vickistorm   6/3/2014 5:35:04 PM
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I disagree. The sale of Hisilicon & Spreadtrum can't reach this amount at all. However, they still can survive. BTW Hisilicon's GSM/TDSCDMA/WCDMA/TDLTE/FDDLTE modem(Balong) is doing good.

DaisyCSage
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Re: Modem doom
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prashanth.bhushan
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Re: Modem doom
prashanth.bhushan   6/3/2014 6:45:10 PM
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No its not about patience but its about comign to terms with reality finally. Better late than never. This was expected I guess - after TI, NXP, STE, ADI, Freescale etc ( a long list).

The bigger question now is who would buy - very high chance that it will be Apple. for various reasons.
  • Right fit for their vertical integration, gives them the technology & all the patents.
  • Access to one of the best patent pool ( Brdcom, Renesas & Nokia ) . This will also help them take on Microsoft
  • Reduce their dependency on Qualcomm

I expect Qualcomm's stock to take a beating if this happens. l :-). Remember that Samsung is now completely vertically integrated including their own multimode-modem.

Views & thoughts are welcome.

GeeKv2
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Re: Modem doom
GeeKv2   6/4/2014 5:55:34 AM
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I highly doubt Apple will buy this.

They will inherit multiple modem platforms of the same generation from Broadcom and Renesas Mobile just like it happend with STE. If they were serious about vertical integration, they would have bought Renesas Mobile last year or someone else by now. Its too messy at Broadcom.

prashanth.bhushan
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Re: Modem doom
prashanth.bhushan   6/4/2014 9:45:17 AM
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Inherit multiple platforms, true but Broadcom had already done one level of consolidation, So really should not be very messy.

They have not bought someone else because there is no one else who has a multi-band LTE qualified modem ( other than IMC ).


.. and Rensas modem I believe is fairly robust & strong ( dont have the relevant technical details on this to make a qualified judgement).

krisi
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Re: Modem doom
krisi   6/3/2014 8:16:45 PM
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Whoow...I am really shocked...I though Broadcom was after "conquer it all"

Hughston
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Re: Modem doom
Hughston   6/5/2014 2:47:46 PM
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You would be surprised as to how much this costs.  Even Intel will feel the pain and they can fail.  This is very specialized knowledge that few companies can buy or develop. There are a couple of companies that spent over $1 billion and failed.  Qualcomm spent far more than that.

Hughston
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CEO
Re: Modem doom
Hughston   6/5/2014 2:44:04 PM
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I think several of those are going to bite the dust too. Some of these companies have a product but it will not be enough to compete in the market. Broadcom was always hyping what they had but they knew they had nothing. Some other companies are doing the same thing.  It could come down to only three or four vendors.  I wonder what Intel has, or Spreadtrum, or Marvell, or Mediatek. Erricsson claims they have a good part. With all the bs being said, it is no wonder nobody knows what to think about the market.  Fewer vendors will give better pricing power to the few companies that can compete.  When the market starts to reduce the numbers of wireless standards the vendors have to support, then things will get easier.  I have reasons to think that Mediatek, Marvell, Intel and Spreadtrum will all fail. I am waiting to see if that happens.

scud
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Hurried closing
scud   6/3/2014 2:50:37 PM
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There is an element of impatience in this closing decision as well. Broadcom acquired Renesas and is now closing down the whole thing (legacy Broadcom + Renesas cellular business) within 8 months. Is it realistic for complex modem technology to come out as phones in less than 8 months, and that too in large volumes? I wonder why the market related calculations could not have been done earlier .....

mux2468
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Re: Hurried closing
mux2468   6/4/2014 1:11:34 PM
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I definitely agree with your point. Original acquisition doesn't seem well thought out now; They would have been really wrong in their calculations if they expected to start making dent into the modem space within 8 months.

GeeKv2
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Re: Hurried closing
GeeKv2   6/5/2014 8:07:54 AM
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The original acquisition took place quite late i.e. after Renesas Mobile declared closure of the business. Nothing happened while it was set for sale. This clearly indicated that future prospects of the platform was good. And this is with good reason as Broadcom was getting a market ready modem which they desperately needed.

What I think happened next was that the projects did not take off as promised by the potential phone maker. If you have worked in this industry, you can guess who it could be.

That was also one of the reasons why Renesas Mobile decided to quit after Nokia went for Qualcomm/Windows and the promised volumes didnt ship.

Hughston
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CEO
Re: Hurried closing
Hughston   6/5/2014 3:20:42 PM
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I asked a friend that question a few months ago and he said the design cycle to get into a mobile phone is about a year. But once you are part of a design platform, then you can get into other products quicker.

ismini.scouras
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Not surprised
ismini.scouras   6/3/2014 3:14:04 PM
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CEOs from all sectors (not just tech) are even more hard-pressed today to make risky decisions work. If an investment doesn't yield the kinds of gains that are most beneficial to shareholders within six to nine months, their job is on the line. I'm not inferring here that McGregor 's position was in jeopardy because there were no sentiments on the Street of that nature. But I think we will see management at more companies pull out of a market quickly, if they can't gain traction fast enough to be a market share leader.  

chippmunk
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Who's next?
chippmunk   6/4/2014 3:24:35 PM
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This is indeed quite shocking news... I cannot explain how come B'com has now 3000 enginners behind this chipset, when they bought from Renesas about 1500 engineers, hence double headcount after all the layoffs on both sides. If this is the situation, it might make sense that the economics behind is not adding up. Then indeed, it is not easy to make miraculous changes in this business in 8 months! I wonder when the mistake has been made, when B'com bought Renesas?, or now when they pulled out of this business? 

But what is clear is that in less than 1 yr, two players are out, Renesas and B'com. Who's next? Intel? Nvidia? On the prospect that somebody can buy B'com's chipset... hard to believe. There were comments on Apple, the main question in this case is: if Apple did not buy the B'com product, why would they buy the business itself? I'am afraid this is the end of the line, RIP NWM!



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