Shipments of cellular baseband processors boomed in 2006, reaching 1,125 million units, according a new report from The Linley Group. The vast majority of these processors came from large American and European semiconductor vendors such as Texas Instruments, Qualcomm, Freescale, and NXP (Philips). For the first time, however, an Asian supplier played a significant role in the market, as Taiwan-based MediaTek achieved a market share of 5.3%. Last year also saw the first baseband vendor in mainland China, Spreadtrum, reach 1% market share. These two companies continue to gain share in 2007, taking advantage of growth in China and other emerging Asian markets. Baseband shipments are driven by shipments of wireless handsets (cell phones), which exceeded 1,000 million units in 2006. The Asia-Pacific region consumed about 320 million handsets, with 130 million going into China alone. Handset sales in Asia grew by nearly 30% in 2006, outpacing growth in Europe, North America, and South America. Although Japan and Korea are the second and third largest consumers of handsets in Asia, most of the growth is coming from China and India. MediaTek After gaining success selling chips for CD and DVD players, Hsinchu-based MediaTek introduced its first baseband processor in 2003. Its products support the GSM/GPRS standard that is widely deployed in China and other emerging regions. GSM is simpler to implement than the UMTS protocol that is popular in Japan and Korea, allowing MediaTek to develop low-cost chips. The company courted smaller handset designers by offering all three of the main components in a low-cost phone: the baseband processor, the power-management chip, and the RF transceiver. In addition, MediaTek provides reference designs and a basic set of software, minimizing the time needed to design a new handset. Because of its location, MediaTek can support customers in Taiwan and China more easily than large overseas chip makers can. In contrast, Texas Instruments, the world’s leading supplier of baseband processors, focuses its efforts on larger, established handset makers. TI no longer supplies reference designs for its processors, nor does it provide a complete set of software. TI expects its customers to develop their own designs or to pay a third-party design house to develop the system and software. As a result, MediaTek has won many designs from TI as well as from NXP, Agere (now part of LSI), Analog Devices, and others. With its low-cost products and superior support, MediaTek has become the supplier of choice for basic GSM/GPRS handsets. The company is highly profitable and is reinvesting these profits to develop more sophisticated processors that support EDGE and even UMTS. These new products will help MediaTek compete worldwide. Spreadtrum Spreadtrum’s founders, including CEO Ping Wu and CTO Datong Chen, were born in China but educated in the United States. After successful careers in the U.S., they returned to China in 2001 to start their company. Spreadtrum released its first baseband processor in 2003. Like MediaTek, the company has been most successful with its GSM/GPRS processors, selling mainly to local vendors. With fewer resources than MediaTek, Spreadtrum has grown more slowly, but the company recently achieved profitability. In July 2007, Spreadtrum because a publicly traded company on the U.S. NASDAQ exchange. Spreadtrum’s products have the advantage of combining the baseband processor and power manager into a single chip. This integration reduces cost, power, and board area. Spreadtrum has invested in TD-SCDMA, China’s version of UMTS. In 2004, the company was the first to sample a TD-SCDMA processor, and it is one of only four companies that have qualified TD-SCDMA chips for handsets that will start to be deployed later this year. (MediaTek is not in this group of four.) Of the four, Spreadtrum has the most compact solution and is gaining the most design wins. Going Global Both MediaTek and Spreadtrum have built profitable and growing baseband businesses in just a few years. In contrast, large companies such as Broadcom and Intel (now Marvell) have spent far more money to get into the baseband market and still have less market share than either of these companies. MediaTek and Spreadtrum have several advantages: lower cost of engineers, proximity to the growing Asian market, focus on the low end, and a willingness to support small handset makers. These advantages have helped them grow quickly, but it will take stronger technology to win designs from the established handset makers. With profitable local businesses, these Asian baseband vendors can afford to be patient while pursuing larger customers.
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