Scottsdale : In what is certainly an event that will rock the competitive landscape of the mobile processor market, NVIDIA announced today that it has agreed to acquire Icera, one of the few remaining independent baseband processor providers for both 3G and 4G cellular phones, data modems, and tablets.  The acquisition, for $367 million in cash, has been approved by both companies’ boards of directors and is expected to be completed, subject to customary closing conditions, in approximately 30 days.

In the New Baseband Solutions Fuel Mobile Broadband Devices report and recent articles, The Year of Consolidation and The Quest for Baseband Technology Heats Up, I highlighted the growing importance of baseband technology in SoCs (also referred to as mobile processors and applications processors) for mobile platforms.  What once was dubbed a “commodity” is now a differentiator because of the drive to higher performance with lower power and smaller footprints, which is all enabled by the fundamentals of Moore’s Law.  At Mobile World Congress, Broadcom became the latest semiconductor vendor to introduce mobile processors with an integrated baseband modem, joining the ranks of industry leaders Qualcomm, MediaTek, and the notable intentions of Intel with the acquisition of Infineon’s wireless group.

If the recent smartphone and tablets introductions are any indication, the mobile processor incumbent, TI, is seeing significant competition from Qualcomm in the smartphone segment, and Nvidia in tablets.  But in truth, the competition is much stiffer with a plethora of ARM partners vying for the same socket, including Broadcom, Freescale, Marvell, Renesas Mobile, Samsung, and ST-Ericsson just to name the major players.  However, Qualcomm’s Snapdragon and Nvidia’s Tegra 2 appear to be benefitting the most as of late.  The specifications of the current Snapdragon and Tegra 2 products are very similar with only the integrated baseband of the Snapdragon setting the two apart.  However, Tegra 2 was first in its class, a dual-core Cortex-A9 processor, to market, which gained Nvidia credibility along with a significant number of design wins.  However, the lack of an integrated baseband solution has limited Tegra’s opportunity in smartphones.  In response, Nvidia has been working with Icera on a development platform with Icera’s software configurable baseband solutions.  As a result, the acquisition is not surprising, but the ramifications are significant.

Icera was working with two key processor vendors on development platforms—Nvidia and TI.  While Icera claims that it will continue working with existing partners, this definitely creates a problem for TI, which exited the baseband business in the 2009/2010 timeframe.  Not only does this eliminate one of the potential independent baseband partners, it makes partnering with the remaining supplies more difficult.  Icera was the only remaining independent supplier with a solution that supported both 3G and 4G standards.  The remaining independent suppliers are specialized in either 3G or 4G (a complete list of suppliers is available in the In-Stat report Handset Components: World Trends and Forecasts).  One could argue that 3G is not important because of the transition to 4G.  However, it will take years before national or significant global 4G coverage is available and decades before the older 3G networks are disabled by mobile operators that seek to keep the older networks running as long as possible to manage the growing data and traffic demands, as well as to maximize their ROI from these networks (more information on 3G and 4G mobile operator adoption strategies is available in In-Stat report The State of the LTE Market: CAPEX, Deployments, Subscribers, and Services).

For Nvidia, the acquisition opens the door to any connected application with its Tegra family of processors and the timing could not be better.  Nvidia is already sampling the next generation Kal-el platform, which will presumably be called Tegra 3.  Kael-el will once again be the first in its class with four ARM Cortex-A9 cores and four Nvidia GPU cores.  Nvidia is also setting a new competitive cadence by introducing a new processor approximately every twelve months, something that has not been seen in the mobile industry before, and providing a roadmap through 2014.  Although details of the roadmap are scarce, we can only assume that the Wayne, Logan, or Stark platforms may have integrated baseband modems in the 2012, 2013, or 2014 timeframes, respectively.

In many applications, such as tablets, integrated baseband has not been a requirement due to the current business models of mobile operators.  However, as the business models change from being device specific to being user specific (the broadband bucket approach), having wireless baseband in tablets will be an advantage.  Although mobile operators have been hesitant to make this change, In-Stat believes it will result from increased competition.  In addition, the drive to connect every part of our lives, including our cars and our homes, will further open opportunities for processors with integrated baseband solutions.  In-Stat believes that Nvidia’s acquisition is a positive move for both companies and one that will further enhance Nvidia’s competitive position.