The iPhones have been unboxed and torn down, so now it’s the Wall Street watchers’ turn to tally up who won and who lost among the companies that provide chips for the envy-inducing device. The big winner is Infineon with four chips, including GPS and 3G radio. Little-known chip firm TriQuint also won, with three power amplifiers inside the phone. Wi-Fi was once again provided by Marvell, but Broadcom scored low, with only a touchscreen controller and no GPS (which we had been expecting).
Most impressive was that the phone contains 19 high-value chips. For silicon vendors the iPhone represents an opportunity to push high-margin chips reserved for high-end smartphones into the average cell phone. Readers of this blog may take a BlackBerry or Nokia N95 for granted, but middle America or even Europe doesn’t always see the point. But if housewives and teens clamor for iPhones, chip makers will cheer.
That’s because the iPhone, in addition to making wireless broadband consumption more accessible to people, will drive smartphone adoption. And smartphones can contain up to six times the amount of silicon found in an entry-level phone. Despite TI not having a large presence in the iPhone, Bill Krenik, CTO of Texas Instruments’ wireless division (the second-largest wireless chip company behind Qualcomm), says the adoption of the iPhone is a good thing for chip makers everywhere.
“It’s a lot more fun to build iPhones and other high-end products than a simple voice-only handset because there’s a lot more design sophistication and exciting features like high-end graphics, but from a business angle there’s more semiconductor content for us to go after,” Krenik said. “There has been a lot of negative sentiment about what more can you really do on a phone, but we’ve ignored that.”
David Carey, president of the firm that conducted an iPhone teardown, Portelligent, said part of the risk point for the wireless industry was that everyone was satisfied — that nothing that would lull consumers into a more feature-rich phone. “If the iPhone does sort of capture the public’s imagination, it’ll have a direct impact on whether the cell-phone industry is a growth market for the chip business, or it stagnates,” he said.
Carey has seen the total space devoted to silicon inside a cell phone shrink as the radios and applications processors became more integrated. Qualcomm and Freescale offer such integrated platforms, while many handset makers still offer an integrated brain and radio for cell phones, even on their higher-end phones like the Samsung Instinct (although phones like the Instinct still offer plenty of other opportunities for chip vendors). Carey points to HTC, Motorola, LG and Samsung as handset companies who tend to consolidate silicon, and offers Nokia and Apple as examples of firms that separate the brains of the phone from the communications chips.
The move toward better integration is the norm in the industry, but despite the rise in the number of cell phones sold and an increase in the sales of wireless chips, it has led to lowered prices per unit. In 2004 when iSuppli started gathering data on the topic, about $23.77 was spent on silicon inside each handset on average. That number dropped to $18.65 in 2007. The wireless chip players are relying on handset growth to keep their sales on the rise — and hoping for next-generation features they can convince consumers and handset makers to buy.
GPS is one such technology gaining in popularity on high-end phones. The iPhone has it, and many software companies are actively trying to make programs and offer services that take advantage of it. Other technologies waiting in the wings are mobile television, which would require chips from Qualcomm in the U.S. or those from Dibcom or Samsung in other countries, and HD video that would require higher-end applications processing such as that offered by Nvidia’s APX 2500 or Texas Instrument’s OMAP 3. Regardless, the iPhone might do more than make semiconductors fun. It may keep chip vendors happy.