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IDC Projects Strong Cell Phone Chip Growth

The cellular chipset market is poised for explosive growth thanks to the advent of a variety of new handheld devices, such as e-readers, mobile Internet products and handheld business devices.

As a result, research firm IDC is projecting the worldwide market for cellular chipsets to enjoy a 9.3 percent compound annual growth rate (CAGR) on a unit basis from 2009 to 2014. While cellular devices made up less than 7 percent of this unit volume in 2009, the total market is estimated to reach a 35 percent CAGR by 2013, when it will account for more than 16 percent of total chipsets, far outpacing the growth in the mobile phone market itself.

That's because many of these devices, while not marketed as phones, have a lot of phone features, and some are expected to have a 3G chip. One of the many rumors about Apple's upcoming iSlate tablet, for instance, is it will have a built-in 3G chip. Likewise, Sony's iRex e-reader will come with a 3G chip, although a carrier has not been announced.

In addition to consumer devices, cellular chipsets are being used in non-mobile phone applications like industrial/machine-to-machine communication, autos and health/medical devices.

"There is strong appeal for real-time data connectivity and access not only in traditional computing devices like notebooks, but also in a number of emerging markets such as medical/health monitoring, industrial/M2M, as well as a growing array of consumer products such as e-readers," IDC analyst Flint Pulskamp said in a statement.

IDC is also predicting that growth in cellular broadband, primarily driven by portable PCs and MIDs, will help accelerate the migration from 2G and 2.5G technologies to 3.5G and 4G technologies. The rollout of the 4G Long Term Evolution standard will greatly encourage this migration starting in 2011.

The market is dominated by very few cellular chipset suppliers -- Qualcomm, ST-Ericsson, Infineon, and Icera -- and that won't change any time soon, said Pulskamp. The skills at Intel (NASDAQ: INTC), nVidia (NASDAQ: NVDA) and Marvell (NASDAQ: MRVL) don't easily translate to base band processors.

"Even though this market is growing, it takes a lot of investment to keep up with the Joneses, as it were, to keep up with developments in over-the-air protocols, he told InternetNews.com. "It's even difficult for the legacy guys to continue to invest to keep on the leading edge. So I don't expect new suppliers to come in on the chipset side."