Witnessing paradigm shift in semiconductor technology

Linley Chips In: Broadcom’s Not-So-Smartphone Strategy.

At its Analyst Day this week, Broadcom discussed its progress in the cell-phone market. Broadcom’s connectivity (Bluetooth, FM, GPS, and Wi-Fi) chips have been quite successful. According to Bob Rango, VP of the connectivity group, these products have won designs with all of the Big Five handset makers except Motorola and all of the top four smartphone makers except RIM.

Scott Bibaud, VP of the cellular group, reported that his products have made impressive headway with Samsung, which has adopted Broadcom’s EDGE and UMTS baseband processors into a number of phones. For example, the EDGE chip appears in the popular Samsung Star, which has already shipped more than 10 million units. The group’s other major customer, Nokia, has been less enthusiastic, so far putting into production only one model that uses a Broadcom baseband.

Product execution continues to be a problem for the cellular group, however, which has announced no new baseband or application processors in more than two years. In fact, the company admitted that its ballyhooed “Zeus” processor, the BCM21551, has been terminated. Zeus, as you may recall, was a technological tour de force combining an application processor, HSPA baseband, 2G/3G RF circuitry, and Bluetooth/FM. We originally heralded the chip’s announcement as a sign of Broadcom’s technology leadership in smartphones. In the words of the immortal Emily Litella: never mind.

CEO Scott McGregor said he pulled the plug on Zeus due to a “lack of customer interest.” Of course, when a product hasn’t entered production two years after its announcement, customer interest may wane. Because of this delay, the processor’s ARM11 CPU did not match up well against the more powerful Cortex-A8 used in many popular smartphones shipping today. Another trouble spot may have been the integrated nine-band RF circuitry, which would have been the industry’s first; Broadcom said that the chip was fully functional but admitted that its customer “preferred” to use its own RF chips.

As a result, the company’s only current offering for smartphones is the BCM2153, which combines a 312MHz ARM11 application CPU with an HSDPA baseband. As this CPU is slower than a two-year-old iPhone, it is not well suited to new smartphone designs. Broadcom offers no standalone application processors for smartphones and, given that the market is shifting toward integrating the application and baseband processors, downplayed its interest in developing one.

To draw attention away from this situation, Bibaud attempted to define a new product category that he called a “smarter phone” or a “smart-feature phone.” This type of phone can provide a widget-based interface and strong multimedia capabilities, but it does not run a smartphone OS and therefore cannot download applications. Although we agree that feature phones are improving and can mimic some smartphone capabilities, Apple’s dramatic success with its App Store demonstrates that the future is all about downloadable apps. Every major market analyst agrees that smartphones will continue to eat into the feature-phone market over the next several years.

Given that Broadcom’s current baseband share is tiny, focusing on the feature-phone segment will be enough to greatly improve its market share in the near term. To achieve longer-term success, the company must restart its product pipeline, and it must deliver processors suitable for the lucrative and growing smartphone segment. –Linley