Categories: Chips

Broadcom looks to sell baseband unit

Broadcom looks to sell baseband unit

Broadcom (BRCM) appears ready to let Qualcomm and its low-cost Asian competitors compete for the baseband market while it focuses on chips for other types of wireless connectivity, such as Wi-Fi, Bluetooth and small cells. Today the California company said that it has hired J.P. Morgan to explore options for its cellular baseband unit, including a potential sale.

The cellular baseband market has skyrocketed along with the market for mobile devices, but Qualcomm has consistently been a leader here while others have struggled. Qualcomm baseband chips connect most iPhones to cellular networks, as well as a number of Android smartphones. According to the analysts at Forward Concepts, Qualcomm had 50% of the baseband market last year. Taiwan’s MediaTek was its closest competitor. Broadcom has less than 5% of the market.


Possible buyers
Now begins the speculation about who might buy Broadcom’s baseband business. One big question will be whether a U.S. chip business will attract an Asian buyer. China is now the world’s largest smartphone market, but that does not mean Asian manufacturers are not interested in buying American competitors in the mobile space. China’s Lenovo recently purchased Motorola Mobility and IBM’s low-end server business.

“MediaTek would be a possibility (for LTE modem only) if they have difficulty getting their own new LTE modem out the door,” said Will Strauss of Forward Concepts. “Not TI (been there, done that); not Intel (they are already committed); not Marvell (they are betting on China); not Samsung (they already have an LTE modem).”

Closer to home, Apple has been named as a possible buyer for Broadcom in the past. But that is hard to imagine, given the company’s longstanding relationship with Qualcomm.

It is possible that Broadcom will not find a buyer at all and will simply write off the business. “It remains to be seen whether Broadcom will find a buyer for its baseband business as historically Freescale, ST-Ericsson, TI and Renesas Mobile all struggled to sell their baseband businesses,” said Stuart Robinson of Strategy Analytics. But Robinson noted that Broadcom has invested in the highest-growth part of the baseband market. “We expect Broadcom’s highly attractive LTE roadmap could attract a player with market share expansion plans,” he said.

$3 billion investment
One analyst estimates that Broadcom has invested $3 billion in its baseband business, with little to show for it. Today Broadcom said that after its sells or winds down the business, it will be able to invest an additional $50 million a year in its broadband, infrastructure and connectivity businesses.

Overall, Broadcom expects to save $700 million a year by exiting the baseband business. Wall Street welcomed this news, sending Broadcom’s stock up more than 7% Monday morning.

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