Renesas promises a renaissance in the mobile space

 
With its $200M purchase of Nokia’s wireless modem business, Renesas has made a chess move that is clearly challenging market leader Qualcomm (NASDAQ:QCOM) in the 3G space, as the 3G handset market rapidly grows from ~30% in 2009 (out of 1.15Bu)  to a projected 55% (out of 1.5Bu) in 2010. The more immediate threat is perhaps to current Nokia suppliers ST-Ericsson, Broadcom (NASDAQ:BRCM), TI, and Infineon.

The deal, expected to close in the fourth quarter of 2010, is for Nokia’s wireless modem technologies for LTE, HSPA+ and GSM standards. As part of the deal, Nokia will transfer around 1,100 R&D employees to Renesas.

This daring move, especially in the face of recent exits by high profile chipset players from the wireless modem business, affirms Renesas’s commitment to being a full wireless systems platform provider.

Renesas Electronics, founded only recently (April-2010) from the merger of Renesas Technology and NEC Electronics (TYO:6723), is expected to become the world’s third largest semiconductor supplier based on combined revenue. Its scale and breadth of embedded products provide the foundation to be a formidable global wireless platform provider.

Here are some implications of the announced deal.


FOR NOKIA
  • Unshackles Nokia and removes internal barriers to sign up with any standard chipset offering
  • Reduces R&D costs and allows Nokia to refocus R&D on core value-added Apps/Services and User Interface/User Experience related activities
  • Strategic alliance that gives access to advanced modem technologies for HSPA+/LTE
  • Increases supplier base for wireless modems

FOR RENESAS
  • Gives immediate access to robust, proven technology for a relatively modest price, that would otherwise have been prohibitively expensive and long-drawn to build from ground up.
  • Provides access to critical IP from Nokia, strengthening its competitive positioning
  • Positions Renesas as one of few strong players to offer a complete mobile broadband platform – Application Processors, Basebands, Integrated SoCs, Power Management, RF Transceivers, and Power Amplifiers.
  • Access to a key customer, and potentially rapid ramp up in volumes globally beyond their traditional Japanese market.
  • Positions Renesas as a key alternate source for Nokia’s high-tier smartphone platform awarded to ST-Ericcson (U8500).
  • Positions Renesas for a significant play in a broad array of wireless embedded device markets in smartphones and beyond (ereaders, gaming, personal navigation, smartbooks, tablets, netbooks, etc.)

FOR OTHER WIRELESS CHIPSET SUPPLIERS
  • It lowers entry barriers to QCOM, BRCM, IFX within Nokia
  • It brings in a strong 3G modem chipset supplier, threatening the dominance and growth of currrent leaders, Qualcomm and ST-Ericsson
  • With its SH-Mobile S-series applications processor, Reneasas increases competitive pressure in the smartphone processor domain, and especially in the integrated applications+baseband SoC space (where it has considerable experience with the SH Mobile G-series) that includes Qualcomm, ST-Ericsson, Marvell, and Broadcom.
  • It ups the ante for standalone Applications processor players to build/acquire modem technology and/or look aggressively at new embedded device markets beyond smartphones.

In summary, Renesas Electronics promises a “renaissance” in the mobile platform space, that is sure to have ripple effects in the wireless semiconductor space.

★★★ There’s more valuable insight on smartphones and new wireless frontiers at http://emblazeworld.com/ in the Resources section

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