15 Nov, 2007
By strengthening ties with number-one handset vendor Nokia in 3G handset chip solutions in August 2007, STMicroelectronics raised eyebrows as the collaboration may allow the company to extend its influence in the handset chip market further in 2008. While some industry players say the race in the handset chip market for market share means a sacrifice in profitability, STMicroelectronics COO Alain Dutheil, however, thinks there is no conflict between the two.
Digitimes recently had the opportunity to talk with Dutheil about his company's partnership with Nokia as well as trends in the handset chip market.
Q: Having forged a collaboration with Nokia, what is STMicroelectronics' strategy for deploying handset solutions in the future? What will the trend in the global handset chip market be like?
A: There are four key points in this collaboration:
1, STMicroelectronics obtains 3G baseband intellectual property (IP) from Nokia;
2, we will inherit 180 employees from Nokia;
3, newly developed chips are not limited only to adoption by Nokia and;
4, we will be one of the baseband chip suppliers for Nokia in the future.
This collaboration enables us to speed up volume production and time-to-market schedule for 3G chips. By integrating chips for radio frequency (RF) transmission, multimedia content management, power management, Wi-Fi connection, RF identification (RFID), CMOS image sensor and micro electro-mechanical system (MEMS) devices, we will continue introducing competitive 3G solutions in the future.
I believe demand growth for handsets in emerging regions will pick up noticeably in the future. And we also noticed that customers from these regions are having a stronger desire for mainstream and high-end handsets than entry-level and low-cost handsets. The penetration of 3G handset solutions in these regions will pick up faster. Once we are ready to meet this demand in terms of higher flexibility, extending applications and competitive cost structure, we will have a better opportunity to address their demands and have our sales grow in line with this demand trend.
Q: There is now a smaller number of handset chip suppliers, with IDMs and fabless companies evenly dominating the chip supply. How does STMicroelectronics see its own competitive edge and how are you going to face the challenges that stem from balancing market share and gross margins?
A: The two key directions for handset chip development will be functionality diversification and single chip solutions. The success of suppliers will judged by their ability to equip solutions with more functions with competitive technology strengths and speed up the time to market of related single chips.
As an IDM, we outperform competitors by offering a complete supply chain from design to backend production, as well as a broad IP portfolio. By having a stronger integration power and higher reliability with all components in the solutions being supplied by us on a competitive cost structure, we are definitely a popular handset supplier.
Every chip supplier has to persistently pursue more efficient productivity and better yields to bring a more competitive cost structure. They also have to bring innovative designs and technology. We therefore do not view the relationship of market share gain and gross margins as conflicting. When a chip supplier is capable of managing the mentioned principles well, it means they are not far from a win-win position.
