5 Reasons Renesas Ditched Modem Business
6/28/2013 05:00 PM EDT
MADISON, Wis. — Ailing Japanese chip vendor Renesas Electronics Corp. officially announced Thursday, June 27, what appeared inevitable to the rest of the world: termination of its wireless modem business.
Renesas acquired in 2010 a wireless modem development team from Nokia, all of whom will be affected: 1,100 employees in Finland, 300 in India, and 30 in China.
The acquisition of Nokia’s modem business, when announced, met with skepticism from the industry while revealing Renesas’s ambition to transform from a chip supplier to the world’s mobile technology leader.
That impossible dream, however, went belly-up after a three-year struggle.
So, what exactly happened?
First, the world order in the mobile market, since 2010, has dramatically shifted, leaving power with a handful of smartphone winners (namely, Apple and Samsung) and mobile chip suppliers (Qualcomm, Samsung).
If you are not in iPhone or Galaxy by now, you’ve found that your mobile chips — especially those designed for advanced smartphones — have nowhere to go.
Clearly, building a company based on advanced cellular technologies of well known pedigree (such as those of Ericsson or of Nokia) wasn’t enough to win the global battle. Neither Renesas Mobile Corp. (RMC) nor the ST-Ericsson joint venture (which broke up earlier this year) was able to survive the violently turbulent market of the last two years.
Second, neither ST-Ericsson nor Renesas Mobile had a credible China strategy.
Both companies lagged far behind their peers in Asia, including Taiwan’s MediaTek, China’s Spreadtrum, and a growing number of China’s indigenous fabless chip vendors, all focused on the now burgeoning low-cost smartphone market in Asia. Neither RMC nor ST-Ericsson had the right product portfolio or development strategy to meet the needs of OEMs and ODMs in China.
Third, let’s not underestimate the workforce needed to develop cellular modems.
The development of modem chips requires engineers with the sort of intimate knowledge and experience that enables them to keep up with constantly changing cellular standards.
More significantly, unlike digital apps processors, the work on those cellular modem chips is often never done, even long after the modems are designed, due to a long certification process they must go through.
Modem chips need to be field-tested, modified, and approved by cellular operators. And then they get adjusted again.
It’s not unusual for modem chip developers to keep more than a thousand engineers.