Beware The Killer App

Semiconductor makers love killer applications. Traditionally, it meant a product relying on semiconductor technology had surfaced that consumers or industry, or both, couldn’t wait to get their hands on. It also meant a surge in demand for semiconductor components that had the chipmakers’ bean counters rubbing their balance sheets with glee.

Now it’s true to say that killer apps don’t come along too often. But if we’re to believe industry analysts, and sometimes that’s a challenging “if,” then femtocells may prove to be such an app. There’s no doubt that the predicted take-up figures for femtocells are impressive.

In Europe alone, about 11million femtocells are expected to be in use by 2010, soaring to 16 million by 2011. In the USA, the market for femtocells is predicted to reach $5 billion by 2012.

So why the high interest in femtocells? Well, there are some key elements that make them very attractive to consumers.

Femtocells are very small, very low power mobile-phone basestations, connected using standard broadband DSL or cable service to a mobile operator's network. They provide good mobile-phone coverage at home for voice and data, and they do it at lower cost to the consumer.

They look like WiFi modems, and when in range of a femtocell, a mobile phone will automatically detect it and use it in preference to external cell sites. Calls are made and received in exactly the same way as before. A big security advantage for users is that the signals are sent encrypted from the femtocell via the broadband IP network to one of the mobile operator’s switching centres.

Femtocells also operate at low radio power levels—less than cordless phones and WiFi—which increases phone battery life. On top of that, they handle four simultaneous calls from different users and will provide a much better 3G service than the existing infrastructure.

So from the chipmakers perspective, this is all looking like an application that’s going to swell the corporate coffers. Or does it?

The femtocell market will be intensely price-competitive. Guess where some of that price control is going to hit? That’s right, the semiconductor devices employed in the femtocells are will need to be rock-bottom-priced. That’s not necessary prohibitive for chipmakers, but don’t forget they will need to initially invest substantially in terms of creating the right optimised and dedicated silicon. It will then be down to whether demand for femtocells will create the economies of scale that will ensure the semiconductor companies make a fair profit.

TAGS: Mobile
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