The most critical radio frequency components in any cell phone are power amplifiers, which enable the phone to transmit voice and data back to a base station tower.
Most power amplifiers currently use circuits made with Gallium Arsenide (GaAs). I say "currently" because the dominance of GaAs is under attack.
I've been analyzing the GaAs industry since the early 1980s. Back then, there was an industry joke that more money was spent on market reports on GaAs than on an actual GaAs chips.
Although GaAs has a lot of advantages over chips made of silicon, GaAs kept shooting at a moving target because, as we are all aware, Moore's Law for silicon chips means that they keep getting smaller and more powerful all the time.
3G handsets often contain up to five power amplifiers, and GaAs makes up 100% of that market, which is close to $5 billion.
In addition, the number of power amplifiers per handset is growing because of complex 3G systems, global roaming support and data roaming support.
Pricing for power amplifiers has increased from $0.80 per handset to $2.90 currently and is projected to increase to more than $3.50 once Long Term Evolution (LTE) and Advanced Wireless Services (AWS) spectrum emerge in advanced handsets in the marketplace.
Although industrialized countries are using 3G networks (Remember the
ads?), the reality is that today's world is a mixture of 2/2.5G and 3G, and the majority of subscribers are actually on 2G-based networks.
This should remain the case for a number of years as shown in the chart below.
In 2007, total global cell phone subscribers numbered 2.3 billion, with 351 million of those subscribers on 3G, or approximately 15%. Of new handsets sold in 2010, about 50% will still be 2G. Between 70% and 80% of
RF Micro Device's
GaAs business is in power amplifiers.
Each 2G handset contains two power amplifiers, so this represents a sizable market. Because these handsets aren't as technologically advanced as 3G cell phones -- smartphones in particular -- silicon is making inroads in this GaAs domain. For 2009, only 90% of power amplifiers were made in GaAs, 5% in silicon CMOS, and 5% in silicon LDMOS.
Besides the technical dynamics, Skyworks has positioned itself in the market by the mid-2009 acquisition of CMOS power amplifier supplier
Axiom Micro Devices
. Also, in September 2009, privately held
announced the world's first 3G CMOS RF power amplifier. Black Sand's proprietary CMOS power amplifier architecture offers a breakthrough in combined performance, cost, battery life and reliability.
Replacing GaAs with CMOS can improve manufacturing yield, performance, cost, battery life and call quality. GaAs cost is ~$0.10/mm2. CMOS cost depends of course on process node, but mature CMOS technology pricing is often $0.05/mm2 or lower, even as low as $0.02/mm2.
Black Sand's RF power amplifier products are targeted at mobile phones and other 3G wireless devices, such as data cards and netbooks. This represents another potentially lucrative market for power amplifiers. I estimate the power amplifier market share for WiFi for 2009 at 70% GaAs, 20% silicon CMOS (integrated onto the WiFi chip) and 10% bipolar SiGe (silicon germanium).
Details are available in our reports
The GaAs IC Market
Intel Versus ARM in Mobile Devices and Netbooks/Smartbooks: Insight Into Critical Issues and Market Analysis
At the time of publication, Castellano had no positions in stocks mentioned.
Robert N. Castellano, Ph.D, is President of The Information Network, a leading consulting and market-research firm for the semiconductor, LCD, HDD and solar industries. Castellano is internationally recognized as one of the leading experts in these areas. He has nearly 25 years of expertise as an industry analyst. Castellano has provided insight on emerging technologies to many business and technical publications, including Business 2.0, BusinessWeek, The Economist, Forbes, Investor's Business Daily, Los Angeles Times Magazine, The New York Times, USA Today and The Wall Street Journal. He is a frequent speaker at conferences and corporate events. He has over 10 years' experience in the field of wafer fabrication at AT&T Bell Laboratories and Stanford University before founding The Information Network in 1985. He has been editor of the peer-reviewed Journal of Active and Passive Electronic Devices since 1985. He is author of the book "Technology Trends in VLSI Manufacturing," published by Gordon and Breach. His book "Solar Cell Processing" was published in 2009 by Old City Publishing. He received his Ph.D. in solid state chemistry from Oxford University.