Suppliers are integrating antenna switches and SAW filters into front-end modules and are integrating power amps with auxiliary control circuitry to form power amplifier modules. But with low-cost phones still dominating mobile-phone shipments, de-

mand for older, discrete parts such as SAW filters remains strong, forcing suppliers to continue to stock them along with the integrated solutions they're developing for next-generation handsets.

"It remains to be seen whether the high end will pick up," said Philip Gadd, worldwide marketing manager for the Wireless Semiconductor division of Agilent Technologies Inc. (San Jose, Calif.). The slower-than-expected rollout of third-generation phones has been one factor in the lackluster device sales thus far, Gadd said.

Because 3G and advanced phones are more apt to incorporate features such as gaming and Internet access, they are more likely to use integrated parts to pack more functions in a smaller space. But analysts say OEMs will balk at designing in integrated parts if those devices raise the cost of the phone. "Mobile-phone suppliers want to reduce costs as they increase functionality," said Scott Smyser, an analyst for iSuppli Corp. (El Segundo, Calif.). "They want the functionality but don't want to pay a premium."

Though analysts and suppliers say the cost premium for integrated parts is difficult to quantify, they acknowledge that limited production yield often results in the integrated devices' commanding a premium over discrete parts.

"We have lots of work to do in reducing cost," said Greg Thompson, vice president of sales for RF Micro Devices Inc. (Greensboro, N.C.). "People are looking for the best performance and smallest size. We're working on smaller die geometries, better yields — anything to reduce cost."

But there's evidence the pendulum is starting to swing in favor of integrated RF parts.

According to iSuppli, sales of older discrete mobile-phone parts such as SAW filters and synthesizers are slated to decline in the next few years. Sales of integrated parts like RF transceivers, power amplifiers, front-end switches and duplexers will grow as 2.5- and 3G phones increasingly replace 2G designs, the firm said.

Anadigics Inc. (Warren, N.J.), for one, says it has already seen an uptick in demand.

Earlier in the year, Anadigics introduced a quad-band integrated power amplifier module for GSM handsets that combines a power amp, antenna switch, harmonic filter and control IC. Although the original, dual-band version of the amplifier saw slow acceptance from customers, the new product has gotten a warmer reception, said Ali Khatibzadeh, vice president of wireless business products. "The market wasn't ready for these parts last year," said Khatibzadeh. "But we're seeing increasing acceptance, including from our tier-one customers."

Anadigics is shipping production volumes of two other parts, its AWT6111 power amplifier and AWS5533 RF switch, to LG Electronics for use in LG's VX4400 and VX3100 phones.

Gadd said that Agilent too is integrating more functions into products such as power amplifier modules. "We'll see more 3G CDMA infrastructure investment and expect demand for such handsets to pick up in 2005 or 2005," he said.

RFMD's Thompson said mobile-phone RF transceivers are being redesigned to eliminate an intermediate filtering stage, usually accomplished with SAW filters. Instead, the devices use a low-IF design.

More-integrated RF components will gain steam in next-generation phones as discrete parts dwindle.

Original device manufacturers, too, are taking a closer look at integrated parts. Over the past few years, these companies have helped keep demand for discrete parts strong as they have developed phone design expertise, according to Smyser.

Last week, RF Micro Devices announced production shipments of its RF3140 power amplifier module to Taiwan-based BenQ, a leading handset ODM. The module's integrated power control "enables us to reduce resources and accelerate the delivery of this handset design to our OEM customers," said Irwin Chen, vice president and general manager of BenQ's networking and communications group.

As suppliers improve production yield, they expect integrated parts to become cost-effective alternatives to discretes. Khatibzadeh said the integrated modules Anadigics offers are already cost-competitive with discretes.

One unanswered question, however, is how the integrated parts will address the phone makers' second-source concerns, because they often have unique designs laden with intellectual-property content.

"It's a challenge to develop second sources and keep our advantage of small-size designs," said Scott Klettke, market segment manager at Murata Electronics North America Inc. (Smyrna, Ga.). "It's understood that a customer may send Murata's spec and footprint to a competitor in order to qualify them as a second source, as long as Murata has the first position and highest share. In the event we can't be first to market, we also get asked to make compatible parts to the first-source competitor."

Dual platforms in which different vendors' parts can align on a common footprint are a much-used solution, said Thompson. "The truth is, it is difficult to multiple-source for analog parts," he said.