Broadcom is the largest Wi-Fi chipset vendor in the market. Its purchase of Percello, a small and upcoming femtocell chipset supplier from Israel is a positive endorsement of the state of the femto market. It also is proof of the complementary nature of femto and WiFi where vendors are becoming more open to the need for heterogeneous access technologies.
The femtocell market has definitely turned a corner in 2010 with femtocell shipments expected to cross the 1 million milestone, with larger volumes expected in 2011. There are around 17 operators across the world that are offering a commercial femtocell services. Contract manufacturers in Asia are known to be feverishly ramping up capacity in the last few months preparing for a wave of orders. One of the prominent femtocell vendors Alcatel-Lucent has announced 14 femto contracts that it has secured during 2Q-3Q 2010. There is momentum in the market, something which Broadcom felt was reason enough for it to invest in.
Broadcom has been known to be shopping around, looking for the right time and right supplier to acquire. With Percello it has acquired a growing business that is now supplying to leading femto vendors like Ubiquisys. Most femtocell operators are now diversifying with their OEM supply chains as networks mature and interoperability starts to set in. Femto OEMs are also diversifying their chipset supply chains. This is a sign of a maturing market.
Broadcom could trigger the introduction of Wi-Fi/Femto integrated SoCs. Integrated Wi-Fi femto/pico access points have already surfaced especially for outdoor/metro deployments. Broadcom not only brings with it the cash reserves and clout of a large chipset supplier into the femto market, but it also brings with it experience of riding the Wi-Fi chipset wave where integration and cost reduction have been key to the success of Wi-Fi.
Broadcom also supplies chipsets for 2G/3G handsets as well as DSL/Cable Modems and IPTV set-top boxes. Therefore, Broadcom brings expertise not only in WiFi but cellular, DSL, cable, IPTV all of which are candidates for femto integration. Broadcom’s portfolio lends itself very well to femtocells complementing and strengthening its position as a leading telecom chipset supplier.
One aspect on the timing of this acquisition could be that Broadcom have their eye on LTE and with this announcement they probably get to catch up with their rival Qualcomm. Broadcom recently purchased Beceem to strengthen its WiMAX client base and build its WiMAX/LTE strategy. Percello is also known to have an LTE multimode femto chipset in the works, which could prove valuable to Broadcom. While that could very well be the case, the femtocell chipset battleground we expect the femto chipset battleground to be around WCDMA in the near-medium term where majority of the shipments are expected to be.
While the technicalities and legalities of the acquisition are figured out in the next few months, Broadcom needs to roll up its sleeves and get working from day one. They will need to act quickly, align their strategy and product portfolio with Percello to compete and differentiate themselves in this fast changing, super competitive marketplace.
Further analysis on the impact on this announcement on the femto chipset ecosystem is available in an upcoming Research Insight which is part of our Femto and Small Cell Research Service.