Broadcom exits cell phone chip business

U.S. chip maker  announced Monday that it will give up its cell phone baseband chip business. iPhone and some other high-end mobile devices, are using the Broadcom production of WiFi, Bluetooth integrated chip. But the low business smartphone chip market is occupied by MediaTek, 4G market is dominated by Qualcomm, Broadcom to find a buyer is very difficult.

I asked a few friends in the industry, they think Broadcom out of the cell phone chip business is normal, because there is Qualcomm in Broadcom is difficult to continue to survive. They have their own wireless chip business, cutting off the cell phone chip sector instead of saving hundreds of millions of dollars.

Qualcomm has already seized the opportunity

Broadcom began with a Wireless division, mainly for network devices to provide wireless data connectivity solutions. Their slogan is "connect everything", they do a very good job in this piece. From routing to mobile multimedia processors, they use their solutions, which also include WiFi and Bluetooth chips for high-end cell phones. Later they saw the development of cell phones, set up the Mobile division, and began to do cell phone chips, cell phone baseband business.

Qualcomm started out in the business of cell phone chips, and they quickly became the leader in this industry. But Qualcomm also wanted to develop in the direction of wireless network connectivity, so it also began to do routing chips. Broadcom wanted to steal business from Qualcomm when it first started, but Qualcomm had been in the industry for a long time and had no way to gain the trust of manufacturers. Qualcomm also faced the same pressure from Broadcom in the wireless connectivity space.

Both companies wanted to cross over from the native business to the other's domain, but there was no way to form their own market because the other was too strong. Broadcom's native business is not originally a cell phone chip, so it is difficult to compete with Qualcomm.

Broadcom's chips are too expensive

"The quality of Broadcom's products is good, and the charges are similar to Qualcomm's, but they have a different charging model."

Qualcomm's charging model has two stages, the first stage is when the chip is provided, the manufacturer must pay the cost of the chip and royalties. Cell phone manufacturers through Qualcomm's program to make cell phones, in the time of shipment, Qualcomm will charge the corresponding license fee. This is disguised in the cell phone gross profit into the draw, but the use of Qualcomm's program, the money is relatively less tight.

Broadcom is a chip supplier for cell phone manufacturers. It is simple and brutal way to charge, is to pay the cost of the chip and royalties. On the premise of the same chip quality, the use of Qualcomm's solution is not so tight, coupled with Qualcomm and Broadcom's fees are similar, cell phone manufacturers will generally choose Qualcomm.

This point makes many cell phone manufacturers to Broadcom interest sharply reduced, so that Broadcom's cell phone chip business snowballed.

Additional problems arising from competition

The ecological environment becomes poor when fewer people use Broadcom chips. "The ecosystem is not strong enough to do their development community is too tough, and the development of grassroots software becomes difficult." The ecosystem is not strong enough, and further makes it more difficult to find buyers for Broadcom's cell phone chips. Broadcom itself is also reluctant to let itself and MTK competition, so in the eyes of outsiders, Broadcom has a kind of "high not, low not" feeling.

In addition, Broadcom is also under great pressure from shareholders. "Broadcom cell phone business has lost a lot of money, cut this department can save $ 700 million a year, after so many years of doing no improvement. Now quit may also be subject to the pressure of the shareholders side." Broadcom in the announcement to abandon the cell phone chip business, its share price had risen more than 13%.

Summary

Broadcom began to do cell phone chip business when it thought of competing with Qualcomm, unwilling to put down the forced and MTK all the way. So people in the industry feel that Broadcom is "not grounded". Some people say that China's cell phone manufacturing industry is relatively black, but there are also manufacturers respond: "Let's not talk about black, why Qualcomm can do, Broadcom can not do it?"

Of course, the cell phone chip business for Broadcom is a piece of "rotten meat", and then continue but will spill over to the native business. Broadcom by doing wireless solutions can also live very well, so the exit from the cell phone chip business is a good thing for the company.

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