August 13, 2007
Nokia’s New Chipset Strategy
Let the chips fall where they may
♦ Nokia announced a new chipset strategy including the use of standard 2G chipsets and the licensing of its protocol stack for merchant market chipset suppliers. ♦ Broadcom, STMicroelectronics and Infineon are the clear winners (in that order). ♦ To varying degrees all other chipset suppliers are losers while Texas Instruments faces a “two birds in the bush” situation.
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♦ NOK, along with STM and TI, tried a similar strategy a few years ago. The industry dynamics may have been a bit different but the end result wasn’t exactly encouraging. Has anything changed? ♦ Our current 3G chipset market share forecast remains intact due to timing of new STM solutions and uncertainty over the potential success of the protocol stack licensing strategy.
Thoughts and Implications
Last week Nokia announced that it was going to begin using merchant market chipset solutions from Infineon (GSM) and Broadcom (EGPRS), thus ending a long-standing strategy that required the use of the Nokia 2G protocol stack in handsets that bear the Nokia brand name. Technically, Nokia has been using Qualcomm’s protocol stack and chipsets for CDMA2000/EV-DO handsets but this is generally done through a third-party ODM. Nokia also expanded its 3G supply chain to include STMicroelectronics. Given the complexities of integrating the software on a solution other than a TI DSP, Nokia would not give any indication of when it would begin shipping a handset based on the new platform. We believe that initial shipments would begin no earlier than sometime in 2009 and then slowly ramp over time, but it would also depend on operator acceptance. Nokia further announced that it was going to transfer ~200 ASIC design engineers to STM. From everything we can gather the NOKSTM relationship mirrors the NOK-TI relationship with one exception being that the STM relationship is strictly focused on 3G chipsets while the TI relationship applies to all 3GPP protocol stacks. STM had previously supplied Nokia with its PMU (power management unit) and RF chipsets, although we believe the latter was still based on a Nokia design. Following this strategic shift Nokia indicates that TI will remain a key supplier for GSM, EGPRS and UMTS/HSPA. Finally, and perhaps of least significance for reasons that we will discuss momentarily, Nokia announced that it was going to begin licensing its 3G/2G stack to any interested chipset company, with
certain restrictions, for use in standards-based products (e.g, the Nokia stack could end up in a competitor’s handset). Based on our analysis and conversations with some of the players involved in this announcement we can offer the following observations. Broadcom emerges as the clear winner in this strategic shift. Most importantly, Broadcom has validated and legitimized its entire cellular initiative. Previously, the company had some credible 2G design wins, such as the Treo, but there wasn’t necessarily anything overaching that indicated that Broadcom could be a legitimate and sustainable supplier. Further, the 2G design wins that it had couldn’t translate into meaningful market share to fund and justify its 3G R&D effort. The Nokia announcement erased those concerns. Nokia’s announcement has validated Broadcom’s cellular initiative.
announcement was good news for the company. At the same time TI could actually be better positioned now than it was a year ago when it didn’t have the Motorola opportunity, it didn’t have the more indepth EMP relationship that it...
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