Jolted by some unforeseen competitive and supply chain forces, Texas Instruments is gradually losing market share in its bread-and-butter wireless baseband chip business.

Some observers suggest that Dallas-based TI will rebound and remain a major player, but others believe the chip maker's glory days are over in the wireless baseband arena. Still others wonder whether the company's pending chip announcements and new fab strategies are too little, too late to regain its footing in the segment.

Going into 2008, the big question is whether TI can regain lost momentum in baseband chips or whether it will continue to decline. Another related issue is just how far TI will move down the fab-lite and foundry path for logic circuits, which include baseband chips. That, in turn, could help determine whether the chip maker will sell its new but empty 300-mm fab in Richardson, Texas.

For now, TI remains the world's largest supplier of baseband chips (which are sometimes called cellular phone chip sets). "Baseband chip" is a generic term that describes the central controller or application processor that handles most of the digital functions in a handset.

After years of market dominance, TI's baseband chip efforts are "in flux," said Will Strauss, president of Forward Concepts Co. (Tempe, Ariz.). The competition continues to "chip away at TI" and its baseband share, but Strauss contends that the "party is still not over" for the company.

Still, TI faced heavy competition in the baseband market during 2007. The company lost its monopoly position in the baseband at three major accounts: Ericsson, Nokia and NTT. And this year, the competition is expected to be just as fierce.

Nokia, one of TI's largest wireless IC customers, moved to a multisource baseband chip strategy to reduce its supply chain risks. Nokia will continue to use TI's devices, but the cell phone giant will also source chip sets from Broadcom, Infineon and STMicroelectronics.

TI is projected to gain market share from chip sales to struggling Motorola Inc., but it's unlikely those gains will make up the difference.

In 2006, TI held a commanding 42 percent share of the wireless baseband business, according to Forward Concepts. The next largest competitor was Qualcomm Inc., which accounted for about 25 percent.

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In preliminary estimates, TI's baseband share is projected to have slipped to 40 percent in 2007, while Qualcomm's share is believed to have risen to 30 percent, Strauss said.

Another emerging rival is Taiwan's MediaTek Inc., which Strauss said has been just plain "scary" in the way it has clobbered TI and other competitors in China.

Going forward, the baseband market is up for grabs. "I believe the tipping point continues to be technology-based, with many new [wireless] standards in development," said Doug Freedman, an analyst with American Technology Research Inc. (Greenwich, Conn.). "Picking the right solution road map is likely to determine the next share shift."

As a result of these and other trends, many ask: Can TI fend off the baseband competition and rebound in 2008?

The strategy
On the one hand, TI in 2008 is poised to make a renewed assault on competitors, especially its pesky fabless rivals Broadcom, MediaTek and Qualcomm. Several integrated device manufacturers (IDMs), such as Freescale, Infineon, NEC, NXP and STMicroelectronics, also compete in the baseband chip market.

TI is fighting back by readying a new chip line, evolving its "hybrid" or fab-lite manufacturing strategy and shifting to a new R&D model. Some of the moves are intended to reduce manufacturing costs and make the company a more nimble competitor.

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In addition, TI appears to have changed its strategic tune in logic (including baseband devices). At one time, the chip maker bragged about its advanced logic fabs and processes. But now, it talks less about processes and more about design. Indeed, TI is beginning to sound more like a fabless vendor than an IDM.