This report tracks mobile semiconductors that total $36.7 billion in 2015 revenue. 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. This total is on track to decline 2.3% in 2016. Baseband processors, including those with an integrated AP, comprise the largest segment of this market, generating $21.4 billion in 2015.
Supplier changes at large handset makers have a large effect on the sales of these mobile chips. In 2016 alone, Samsung moved from 100% internal supply of processor chips for its Galaxy S6 to 70% internal supply on the Galaxy S7, while Apple added Intel as a 30% baseband supplier for the iPhone 7. Less widely reported is a trend at both Samsung and Huawei to increasingly use internal chips. These and other changes drive our market forecast.
Vendor consolidation in the mobile-chip market is nearly complete. The termination of Marvell’s mobile efforts along with Intel’s products for smartphones and Android tablets have simplified the market, and the pending merger of Spreadtrum and RDA Microelectronics has finally concluded. As a result, three companies (Qualcomm, MediaTek, and Spreadtrum) will supply 90% of all baseband processors in 2016. These baseband vendors also control much of the application-processor and connectivity markets through integration and reference designs. Most other vendors target smaller markets, including tablets, automotive, and the Internet of Things (IoT).
Qualcomm saw its shipments sag in 2015 during a furious price war against MediaTek. By the end of that year, the company decided to surrender share to maintain its ASP, causing its shipments to fall precipitously in 2016. We expect a 9.1% fall in Qualcomm’s 2016 baseband unit shipments and a 5.6% drop in baseband revenue. This decline ripples through to the company’s application-processor and connectivity shares. In the longer term, we see additional headwinds that will prevent future revenue growth.
Most of Qualcomm’s lost share went to MediaTek, which could take the lead in processor units (if not revenue) as early as 2017. MediaTek has quickly become the #2 LTE vendor with 31% share in 2016, a figure that we expect will rise to 36% in 2020. The company leads in midrange smart-phones and cellular tablets and continues to have a large share in low-cost smartphones and basic phones. Given that most smartphone growth will be in low-cost LTE models, we forecast continued strong growth for MediaTek.
Spreadtrum’s baseband shipments rose to 610 million in 2015 and are on track to reach 700 million in 2016. Most of these chips include application processors and connectivity functions, although the company is also the leader in basic-phone chips. Spreadtrum’s focus on the low end of the market and its weakness in LTE will hamper future growth.
Samsung, Apple, and Huawei are increasingly adopting in-house chips. Apple will spend $7 billion on its own application processors in 2016, about 20% of the total mobile-chip revenue. Samsung is expanding the use of its Exynos processors and recently began using its own Wi-Fi and other connectivity chips in some phones. For its high-end and midrange phones, Huawei has designed complete chip sets including LTE baseband, application processor, and connectivity. These in-house products block the sale of third-party chips into the largest smartphone makers.
In 2016, 62% of mobile Wi-Fi is integrated into the baseband processor, up from 9% in 2013. This shift has hurt Broadcom, the leading supplier of Wi-Fi combos. We expect its connectivity revenue to fall 19.9% in 2016, with a projected CAGR of -9.7%. The company now serves mainly high-end smartphones and tablets.
NFC deployment is rising quickly; we estimate it appears in 38.5% of all 2016 handsets, up from 32.4% in 2015. As the attach rate continues to rise, we expect the market to shift from standalone chips to integrated solutions, but NXP remains the leader in 2016 with projected unit shipments of 612 million. Qualcomm’s pending acquisition of NXP, after deciding to terminate its own NFC solution, will ensure the company’s success.
For each technology covered, this report includes our preliminary estimates of 2016 unit shipments and revenue based on actual results for the first three quarters and projections for the final quarter. We have also forecasted market size and market share through 2020 based on technology and market trends. The report provides breakdowns by relevant technology (e.g. 3G versus LTE) and integration level.