Broadcom Rides Wireless Connectivity Market Growth
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) --
Broadcom
(BRCM)
is a leading manufacturer of wireless connectivity chips, mobile baseband and application processors, digital set-top box and home networking solutions, and chips for networking equipment.
It competes with other North American semiconductor companies like
Qualcomm
(QCOM) - Get Report
,
Nvidia
(NVDA) - Get Report
,
Texas Instruments
(TXN) - Get Report
,
Marvell Technologies
(MRVL) - Get Report
and European semiconductor manufacturers like STMicroelectronics and Renesas electronics.
We recently launched coverage on Broadcom with a near $50 price estimate for the company's stock. Our estimate is around 35% ahead of the market price.
Our analysis of Broadcom is broken into three major segments: mobile baseband and wireless connectivity, home entertainment; broadband communications and licensing; and infrastructure and networking.
See our complete analysis of Broadcom
here.
The mobile baseband and wireless connectivity market is made up of two different markets. The first one is the cellular baseband chipsets and mobile application processors, which are used to provide calling capabilities and processing power in phones and the second is the wireless connectivity solutions market, which consists of devices that add connectivity solutions to the mobile phone like Wireless LAN (WiFi), Bluetooth, FM, Global Position system, Near-field Communication (NFC).
The mobile baseband market reached close to $15 billion in gross revenue in 2011, and the leading player in cellular baseband is Qualcomm with more than 40% market share. The mobile application processor market had upwards of $5 billion in gross revenue in 2011 and is growing quickly as the demand for smartphones and tablets is on the rise. Qualcomm leads this market as well with an almost 50 percent revenue share in the third quarter of 2011.
The wireless connectivity market is the fastest growing market in the wider semiconductor market. It is experiencing huge growth due to the demand for devices to be interconnected as well as the almost standardization of WiFi, Bluetooth, FM and GPS applications on smartphone and tablet devices. The wireless connectivity market was more than $7 billion in 2011 and is expected to outgrow other markets. Broadcom is the leader in the wireless connectivity market with and almost 35% market share and well ahead of players like Texas Instruments and Qualcomm.
While Broadcom has a 35% share in the wireless connectivity market, its share of the mobile wireless market (i.e. WiFi, Bluetooth, FM, GPS solutions solely for mobile platforms) is around 90%, giving it a huge lead over other players in this market. Though wireless connectivity is being extended to other consumer electronic products as well, it is the smartphone and tablet market that has the biggest demand and the biggest growth potential.
Broadcom's advantage is such that all high-end smartphones of today use its connectivity solutions. In fact Broadcom's chips are in the Apple iPad, the Samsung Tab, Motorola Zoom, four of the top four Gizmodo phones, four of
CNET
's top five phones; and nine of
PCWorld
's top 10 phones.
Though the recent acquisition of wireless chip maker Atheros by competitor Qualcomm indicates that competition may get tougher for Broadcom, we believe that Broadcom's superior research and development and integration capabilities will put it ahead of the competition.
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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
