CHARLOTTE, N.C. – Cell phones are increasingly using a single chip to handle all their internal workings, which may spell trouble for the companies supplying more specialized chips.
These makers include RF Micro Devices Inc., STMicroelectronics NV and Skyworks Solutions Inc. However, the news is good for Texas Instruments Inc., a leader in the single-chip movement.
Single-chip phones offer fewer features but have risen in popularity, especially in developing countries, where prices matter more and sales are brisk. Projections suggest that such phones could represent 20 percent of the total handset shipments by the end of 2008.
“It’s where the industry is moving at a noticeable pace,” said Cody Acree, a semiconductor analyst at Stifel Nicolaus. “It’s not something that’s off in the future.”
The move to a single-chip architecture is a natural progression for the semiconductor market and follows a similar track in the personal-computer industry, where companies such as Intel Corp. are developing chips with built-in graphics capabilities.
“Certainly people want fancy phones, but the bread and butter is at the low end,” said Roger Kay, president and founder of market research firm Endpoint Technologies Associates. “Integration is always a threat to those that make discrete parts.”
ThinkEquity Partners analyst Michael Burton said he expects 20 percent of new cell phones to contain a single chip by the end of 2008, and the gains won’t be confined to low-end phones.
Burton said Texas Instruments’ LoCosto solution has gained meaningful traction among the top cell phone makers.
Dallas-based Texas Instruments agrees that a single-chip architecture won’t only be for cheap handsets. Alain Mutricy, vice president and general manager of Cellular Systems at Texas Instruments, said it also will find its way into midrange cell phones, largely in emerging markets. Today there are 2.8 billion cell phone subscribers, with that number expected to reach 4 billion in 2010, noted Mutricy.
Michael Markowitz, a spokesman at STMicroelectronics, maker of discrete components for cell phones, said that, by the time midrange cell phones start incorporating a single-chip architecture, the company should have a product available.
The STMicroelectronics spokesman said the trend toward a single chip has a “minimal impact” since most of the phones using the single chip are in areas of the market his company doesn’t go after.
Brian Daly, vice president of marketing at Skyworks, said in an e-mail statement that for the “foreseeable future” a single-chip architecture will only be needed in the low-end “voice-centric” cell phone market. He said consumers’ appetite for phones that include things such as digital music players, cameras and video recording will drive the need for specialized chips.
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