This report tracks mobile semiconductors that totaled $35.7 billion in 2013 revenue; we forecast this total to grow to $44.9 billion in 2018. This total includes cellular baseband processors and their associated RF and power-management chips, application processors (AP), mobile Wi-Fi chips, mobile Bluetooth chips, GPS chips, NFC chips, and combo connectivity chips. Baseband processors, including those with an integrated AP, comprise the largest segment of this market, generating $21.4 billion in 2013.
Changes in the shipments of wireless handsets, smartphones, tablet computers, and other mobile devices have a large effect on the sales of these mobile chips. In 2014, Samsung is losing share in smartphones while the former Nokia (now Microsoft) is losing share in handsets. In both cases, Chinese vendors such as Huawei, Xiaomi, and ZTE are picking up the slack. These changes, along with supplier changes at several lead¬ing vendors, help some chip suppliers and hurt others.
The market is also being roiled by vendor transitions. After Renesas and ST-Ericsson exited the smartphone market in 2013, the past year has seen a larger player, Broadcom, withdraw. Nvidia canceled its program to develop integrated processors for smartphones and is likely to terminate all baseband development as well. Both Spreadtrum and RDA Micro-electronics were acquired by a Chinese state-owned entity. These changes put new opportunities into play and remove others from the table.
Qualcomm is gaining share in baseband processors because of declining use of GSM (which it does not supply) and increasing use of LTE (where it holds more than 90% market share). The company also gained share in Samsung smartphones that formerly used Broadcom or Exynos chips. We expect Qualcomm’s unit shipments to rise 19.1% in 2014, whereas the overall baseband market will grow by just 5.7%. Its average selling price (ASP) is rising because of its dominance in LTE, which serves the top end of the market. Over the next few years, however, we expect this ASP to fall as competitors enter the LTE market.
MediaTek is growing rapidly in smartphone processors, trailing only Qualcomm. It also ranks second in 3G baseband shipments. This shift is boosting MediaTek’s ASP from $5.47 in 2013 to a projected $6.92 in 2014, helping the company gain share on a revenue basis. Given that most smartphone growth will be at the low end, we forecast continued strong growth for MediaTek through 2017.
The most significant trend in application processors is the integration of the AP into the cellular baseband (AP+BB). In 2014, 92% of non-Apple smartphones will use an AP+BB chip, leaving little room for merchant AP chips in smartphones. Still, we expect 638 million standalone AP chips to ship in 2014 (including Apple’s internal design). This total will remain roughly flat through 2018 as growth in tablet shipments compensates for the decline in AP usage in smartphones.
In 2013, the top overall AP vendor is Qualcomm, with 30.9% share. MediaTek ranks second with 224 million processors. This total is actually surpassed by internal consumption of application processors, mainly by Apple, which totals 18.6% of all AP chips. When considering only stand-alone AP chips, Samsung is the leader with its Exynos processor, but Intel is climbing the charts with subsidized sales of its x86 processors. Tablet-only vendors such as Allwinner and Rockchip are losing share in 2014 to Intel and MediaTek.
Like the AP, Wi-Fi is now being absorbed into the baseband processor. We forecast that baseband-integrated Wi-Fi will rise from 9% of all Wi-Fi chips in 2013 to 51% in 2018. This transition is moving quickly in low-cost and midrange smartphones, which often use reference designs from MediaTek, Qualcomm, or Spreadtrum. As a result of this shift, shipments of traditional Wi-Fi combo chips will have just 1.3% CAGR during the forecast period.
This shift is bad news for Broadcom, which shipped 53% of all mobile Wi-Fi chips in 2013. We forecast its Wi-Fi share to fall to 32% in 2018. The company is suffering a double whammy as its baseband customers, which often used its Wi-Fi chips, switch to integrated solutions from other baseband suppliers. We expect Broadcom’s total connectivity revenue to decline at a –7.9% CAGR from 2013 to 2018; including the effects of the baseband withdrawal, this CAGR is –11.8%.
Smartphones and tablets now consume 89% of all mobile connectivity chips, causing connectivity vendors to focus on combo chips that supply as many of the main functions (Wi-Fi, GPS, Bluetooth, and FM) as possible. Three-way combos (Wi-Fi, Bluetooth, and FM) are the most common option today, with a shift to four-way combos coming in 2015. As standalone connectivity chips disappear, the market share for Bluetooth and GPS chips is becoming quite similar to that of Wi Fi chips.
NFC deployment is rising and will accelerate with its adoption in the iPhone 6. We estimate the NFC attach rate at 21.6% of all handsets in 2014, rising to 58.5% in 2018. This growth will drive shipments of mobile NFC chips to 1.82 billion units in that year, according to our forecast. Most of these chips, however, will be either combo chips or cellular basebands that integrate the NFC function. The current leader in NFC chip shipments, NXP, will not benefit from this trend because it lacks the technologies required to create integrated solutions. We expect Broadcom to become the market leader in 2016, with familiar faces such as Qualcomm and MediaTek also gaining.