Manufacturers move cautiously as they addmore blocks to the functionality chain.
Every jump in technology brings about challenges. Just think back to the Verizon World Phone, a CDMA/GSM device touted as working on both European and domestic networks. Except the device was fraught with problems, and it took years to get it right. Even now, users say the phone remains glitch-prone.
But in the interim, it seems the industry has learned a few lessons. Even as it speeds toward 4G and faces a similarly steep mountain of interoperability issues, manufacturers are taking a more cautious approach as they strive to create technological marvels capable of seamless roaming between three generations of wireless technologies.
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“It’s going to be just as hard, but the industry learned a painful lesson when they went from 2G to 3G, and they’re trying to correct their past mistakes. They’re doing more interoperability testing, [which is] going a long way to make sure products work when they’re introduced,” says Michael Thelander, CEO and founder of Signals Research Group.
Instead of an immediate move to high-profile handsets, the initial focus will be on larger form factor dongles. For its part, Verizon is following that trend before moving into higher-complexity, smaller form factor devices embedded in digital single lens reflex cameras and game systems.
This is good news for semiconductors, for whom the more gradual rollout of devices will provide a buffer to sort out technical difficulties before moving to more complex voice and data devices.“It is much easier to do data-only solutions than voice,” Thelander says. “Data is very tolerant of mistakes – it’s not like the call gets dropped.”
THE TECHNOLOGY
Though exactly what manufacturers will have to churn out remains to be seen, creating backwards compatible chips for LTE and WiMAX has its respective complexities. Manufacturers have had to solve a number of tough issues to integrate different technologies and different generations.
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“It’s difficult to integrate these standards, but if you use some smart integration techniques, you can come up with pretty efficient solutions,” says Steve Brown, head of RF product management for Qualcomm.
Brown calls the challenge “really tough,” but says that integrating different generations and standards into a single chip ultimately benefits manufacturers. “It’s more than integration for integration’s sake,” he says. Integration increases economies of scale and streamlines manufacturing, ultimately lowering costs for manufacturers and carriers.
One intricacy with LTE-compatible devices is the required multiple input/multiple output (MIMO) antennas, which are harder to fit into a small form factor device like handsets. While it remains to be seen how well MIMO antennas work in extremely small form factor devices, manufacturers will certainly get some breathing room with larger form factor dongles.
Chips also must support a labyrinthine mix of frequency bands to seamlessly transition between 2G, 3G and 4G. There’s AWS at 1710-1755 MHz and 2110-2155 MHz; LTE at 746–757 MHz and 776–787 MHz; GSM at 890-915 MHz and 935-960 MHz – just to name a few.
And if you want that device to work with WiMAX, it will need to get up to Sprint’s 2.5 GHz spectrum – and that’s before integrating Bluetooth and GPS as well.
Though LTE and WiMAX have their similarities, an abundance of complexities exists when it comes to integrating them on a single device. That sort of integration would be necessary for phones capable of worldwide roaming, as some countries are going with WiMAX and others with LTE.
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“The key technical issue is around using a different digital modulation (OFDM vs. CDMA) which results in a need to use a completely different set of signal processing. In both these techniques, signal processing is done using special hardware accelerators inside the baseband processor,” says Rob Prudhomme, vice president of practice development at inCode, where he’s responsible for analyzing market trends and creating tools for strategic plan development.
Prudhomme says that another key technical issue is for multimode basebands to integrate hardware accelerators that can perform both techniques within the baseband processor without limiting other components: “Whereas this can be attained with the current level of integration possible in the CMOS circuits, it will limit the integration of other components like the application processor, graphics accelerator, etc., which are required for current enhanced devices like smartphones.”
To put it plainly, he compares integrating OFDM and CDMA in the same device to overlaying Chinese and English on an etching plate and expecting someone to read the resulting jumble.
One interim solution that has been used in the past is the “Velcro Phone” approach, where separate components are sandwiched in one casing. It’s a quick solution to some technical challenges but one that doubles cost, doubles physical space, tends to drive up manufacturing costs and is likely to cause problems when switching between the two, Prudhomme says. Plus, the result doesn’t exactly pander to the small, sleek phones demanded by consumers, says Qualcomm’s Brown.
Though the technologies are almost stunning in their complexity, manufacturing giant Alcatel-Lucent says companies have done it before and they’re doing it again. The company creates chips for base stations, not handsets, but works closely with device suppliers and has an intensive interoperability testing program.
“It may be harder to do, but we have experience there,” says Paul Mankiewich, chief technology officer at Alcatel-Lucent’s wireless products division. “Whenever you build out a new set of products, there will be new things … [This] will be no different.”
Still, he admits a transition from WiMAX to LTE – one that U.S. mobile WiMAX provider Clearwire admitted was a long-term possibility – could be tricky. “The idea is that you could migrate WiMAX to LTE, that’s feasible. [W]here the catch comes in is that nothing comes in overnight. You’ll have people in the Clearwire WiMAX network that would also have to support LTE and legacy WiMAX terminals,” Mankiewich says.
That’s not to say he thinks it’s undoable: “The terminal guys are very good at integrating multiple technologies. If the volume is high enough, the term guys will do it. It’s a money issue.”
Still, sometimes the learning curve can be a bit painful. Consider Cingular (now part of AT&T), which was the first in the world to deploy HSDPA. The company had planned to deploy 50 markets by the end of 2005, but due to difficulties getting the new technology to work properly, the deployment stalled. Only 17 markets were launched by the end of that year.
THE ECONOMY
Chip manufacturers not only face a maze of increasingly complex technologies, they face a capital crunch that will put limitations on capital-intensive research and development projects. Analysts have reservations about how feasible large research and development expenditures will be for smaller players given the ongoing economic turmoil and corresponding capital crunch and predict increased industry consolidation as a result.
The fortunes of the chip industry are increasingly tied to macroeconomic conditions. Shrinking GDP, falling consumer confidence and decreased disposable income are practically inescapable, and the industry has found no refuge as the economic crisis has spread to every corner of the globe.
This past year, worldwide semiconductor sales had their first year-on-year drop since 2001, according to the Semiconductor Industry Association (SIA). Sales fell 2.8 percent compared to 2007, but steep sequential declines in monthly sales point to deepening troubles for the industry.
Consumer demand has waned for products containing semiconductors: corporate IT products, handsets, computers and cars, with declines steepest due to pricing pressure in the industry’s memory sector. November to December sales fell 16.6 percent, to $17.4 billion, and fell 22 percent year-over-year compared to December 2007, when sales were $22.3 billion.
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Sales fell again in January, slumping 11.9 percent to $15.3 billion, a year-over-year decrease of 28.6 percent compared with last year’s figure of $21.5 billion.
Research firms Gartner Inc. and IDC both expect sharp, continued declines in global chip sales. Gartner predicts a 24 percent decline in sales, with IDC predicting a similar drop in sales as well as a 45 percent drop in capital expenditures as the industry moves to cut costs.
“It’s going to be interesting how many [baseband chipset manufacturers] can raise the capital required to move into 4G. It’s going to be a very investment-intensive challenge,” says Nigel Wright, vice president of product management for Spirent Communications.
Both Thelander from Signals Research and Prudhomme from inCode expect to see mergers. “There’s lots of research and development, and you’re going to see a lot more consolidation, especially on the WiMAX side,” said Thelander.
Companies who have already placed their bets are directly affected by carriers’ decisions on WiMAX or LTE.
“The fact that Verizon made public commitments for LTE is manna from heaven for ALU [Alcatel-Lucent] and Siemens,” says Ashvin Vellody, senior vice president of enabling technologies at Yankee Group. “…Verizon’s strategic response to LTE will severely impact one or two vendors. It’s huge to their basic survival. It’s almost like a make or break.”