It is worth a quick spin through CIBC’s U.S.-based tech Equity Research team’s take on 3GSM:
Following a busy week at 3GSM we come away with a fondness for the winding streets of Barcelona and some contempt for the expanse of the Fira (the host facility), which took its toll on our feet. We also come away comfortable that the wireless market has its bearings for another strong year, with the pace of change and technological improvement showing no signs of slowing. In our many discussions four key themes were consistently repeated and we believe set a framework for the critical drivers of 2007.
– 3G bigger and better – we remain bullish on 3G and come away with the feeling that carriers deploying 3G UMTS have really set their focus on the even faster HSPA versions of 3G. With Cingular (T-SP) deploying HSDPA at the same time as UMTS, North America has seen a quick adoption of this faster version of 3G. Not to be outclassed, we sense carriers with earlier 3G UMTS deployments in Western Europe and Asia have accelerated their deployments of HSDPA, quickly moving through the various speed grades 1.8, 3.6, and soon 7.2 Mbps. Several carriers also appear ready to leap over 7.2 Mbps and quickly deploy HSUPA later this year. Ultimately, we see this as good for 3G handset sales and continue to look for shipments to exceed the 175 million forecast Qualcomm (QCOM-SO) has noted. ASPs could also play in Qualcomm’s favor.
– WiMAX charging forward – while the speed of 3G technologies is ever increasing, the parallel WiMAX path is reaching critical mass with equipment vendors. Long the focus of dedicated suppliers such as Alvarion (ALVR-SO) and Airspan, this niche market now has a long list of equally focused large networking companies as well. Motorola (MOT-SP), Nortel/LG (NT-SP), and Samsung are pushing particularly hard with WiMAX a large part of their 3GSM networking message. Although it’s unclear how large this market can be and there are still skeptics (Qualcomm (QCOM-SO) and Ericsson (ERICSP) are two) it’s clear that WiMAX will be very visible in 2007.
– Consolidation, we’re not done yet – 2006 saw no shortage of mergers and acquisitions and we sense that consolidation will still play an important role in 2007. While we may not see as many blockbusters like the Alcatel Lucent and Nokia Siemens (NOK-SP) mergers, we wouldn’t be surprised to see a steady stream of small and medium sized acquisitions as companies fill in holes. The convergence of the wireless and wireline worlds and the accelerated pace of IP-driven network upgrades are leading vendors to fill holes in their capabilities. Ericsson’s recent acquisitions of Redback Networks and Entrisphere are excellent examples of this. We expect Ericsson and Motorola to continue in small/mid-sized acquisitions and see Nokia Siemens and Alcatel Lucent jumping in sooner than most think.
– Handsets see an enterprise push – there was no shortage of smaller, thinner and flashier new phones at 3GSM. While we like some and are puzzled by others, where we see the most meaningful incremental push is on enterprise/data driven devices. Motorola’s new Q’s for UMTS and HSDPA, Nokia’s improved E- series offerings, Research in Motion’s (RIMM-SP) new BlackBerry 8800 (a Pearl inspired qwerty device), and Samsung’s BlackJack are upping the stakes on what enterprise can be. We continue to believe that current devices have barely scratched the surface of mobile enterprise and with the focus of so many handset manufacturers on enterprise we expect the pace of adoption to increase in 2007.
– Single chip, not so fast – there has been much talk about single chip architectures (baseband and transceivers) and several announcements were made by the likes of Texas Instruments (TXN-SO) on new products (Ecosto) and from Motorola of adoption of such technologies in 2007 (Locosto and Ecosto). This has led to investor concerns with respect to the RF specialists RF Micro Devices (RFMD-SO) and Skyworks (SWKS-SO) as they have just gained traction in the transceiver area. From our conversations at 3GSM (some of which with those introducing single chip solutions) we feel comfortable that the “single chip” race is more likely to disappoint near term. We believe low-end applications (very low-end) could see adoption of single chip solutions in 2007, yet the move to EDGE is highly unlikely in the 2007-2008 timeframe. We see performance challenges, yield issues, and the inability to show a true “single chip” (much left out of it) as hurdles for nearterm adoption. The path for the RF vendors is clear.