This report tracks mobile semiconductors that totaled $39.1 billion in 2014 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. Baseband processors, including those with an integrated AP, comprise the largest segment of this market, generating $24.7 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. For example, in 2015, Samsung is losing share in smartphones while the former Nokia (now Microsoft) is losing share in basic phones. In both cases, Chinese vendors such as Huawei, Xiaomi, and ZTE are picking up the slack. These changes, along with supplier changes at several leading vendors, help some chip suppliers and hurt others.
The market is also being roiled by vendor transitions. After Broadcom withdrew from the cellular-baseband market in 2014, Nvidia later did the same. Marvell recently announced plans to exit the smartphone and tablet markets. Intel shipped its first integrated AP+BB processors in 2015, as did Samsung. Huawei deployed a complete set of in-house chips, including AP+BB and Wi-Fi combo. These changes put new opportunities into play and remove others from the table.
Qualcomm’s shipments plunged in 1H15 as a result of two problems. First, the company lost all share of the Galaxy S6 after holding nearly all of the Galaxy S5; we estimate this single loss cost more than $2 billion in revenue. Qualcomm also started a price war against MediaTek for low-cost LTE chips, eventually losing both market share and average price (ASP). We project the company’s unit shipments for 2015 to drop 9% from the previous year, and its revenue to fall 22%. Shipments should recover slightly in 2016, but Qualcomm continues to face headwinds.
MediaTek continues to grow rapidly in smartphone processors and could surpass Qualcomm in 2015 application-processor shipments. The company ranks second in LTE baseband shipments despite shipping its first LTE smartphone processor in 4Q14. After the price war with Qualcomm, however, MediaTek did not get any ASP benefit from its shift to LTE; in fact, we estimate its ASP will decline from $7.23 in 2014 to $6.25 in 2015. Given that most remaining smartphone growth will be at the low end, we forecast continued strong growth for MediaTek through 2019.
Despite the long-standing shift to AP+BB chips, the standalone AP market will grow slightly in 2015, particularly when measured in revenue. This growth is mainly due to Samsung’s shift from an AP+BB processor (Snapdragon 810) in the Galaxy S5 to a two-chip solution (in-Exynos 7 AP and in-house BB) for the Galaxy S6. The cost of the 14nm Exynos 7 is quite high, further increasing the revenue for standalone AP chips. We expect the Galaxy S7 to use AP+BB chips, allowing the standalone market to resume its downward trend.
Like the AP, Wi-Fi is now being absorbed into the baseband processor. We forecast that baseband-integrated Wi-Fi will surpass Wi-Fi combos in 2016 and rise from 9% of all Wi-Fi chips in 2013 to 61% in 2019. 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 decline during the forecast period.
This shift is bad news for Broadcom, which we expect to ship just 36% of all mobile Wi-Fi chips in 2015. Excluding baseband-integrated Wi-Fi, Broadcom’s share is about 67%. The company also lost share when its baseband customers, which often used its Wi-Fi chips, switched to integrated solutions from other baseband suppliers. We expect Broadcom’s total connectivity revenue to decline at a –8.8% CAGR from 2014 to 2019.
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 2016. 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 quickly; we expect half of all smartphones in 2015 will include this feature, rising to 89% in 2019. This growth will drive shipments of mobile NFC chips to 2.1 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 MediaTek to become the market leader in 2016, with familiar faces such as Qualcomm and Broadcom also gaining.