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Broadcom: If no one buys our modem biz, we'll DITCH IT

The real crime? It's unlikely anyone will buy it

Website security in corporate America

Chipmaker Broadcom is moving out of the mobile modem business. The company has announced that if it can’t sell its cellular modem division, the operation will be shuttered.

The news has been greeted with glee by financial types, who point to the $600m the company expects to save as a result of the move. The Broadcom share price shot up by $4 on 2 June as a result, and it seems that this was the driver behind the decision.

Broadcom bought the exceptionally well-regarded Renesas team for $164m last September. Back in 2010 Renesas had taken on the Nokia modem development for $200m.

Modem development is hugely capital intensive, but with a billion phones being sold each year it has the potential to be lucrative, particularly if you have the selling point of not being either Qualcomm or MediaTek.

If Broadcom closes down the old Renesas modem development division, it leaves just Nvidia as a major player in a field which once saw Texas Instruments, Thompson, Ericsson Mobile Platforms, NXP, Freescale, Infineon and others as major competing players. The lack of competitors is not going to be good for the future price curve of LTE devices.

It’s unlikely to be down to technical competency. Broadcom has been very successful in other areas of radio and had good architectures of its own before it absorbed the Renesas/Nokia unit. Of course, integrating the two is a significant technical challenge – particularly when the people working on the designs are geographically spread and the process has set the devices back – but Broadcom recently gained approval for its Release 9 and Release 10 LTE devices and has a good portfolio of parts. It seems that the company just lost its nerve.

Samsung had previously been rumoured as a suitor for Renesas and could be in the frame to pick up the pieces, as could Apple which is a Broadcom customer and which bought the National Semiconductor business to make the processors used in iProducts.

Intel has also been touted as a potential customer but ultimately the cellular modem business has seen such consolidation it’s unlikely that Broadcom, technical excellence notwithstanding, will find a buyer. ®

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