Abstract

Increased Shipment Volume, Reduced 3G Patent Fees Key Success Factors

As regards the cost breakdown of mobile broadband module products, the FOB (Freight on Board) of USB modems currently is approximately US$80, and the mobile broadband module constitutes the majority of the total production costs, ranging between US$25 and US$30. With the gap between costs of other peripherals is becoming insignificant, how to acquire chipsets from upstream chipmakers with more preferential prices has become a focus area for mobile broadband module companies.

Shipment volume has played a key factor for mobile broadband module companies when they are in price negotiations with chipmakers. Companies with relatively high shipment volume are deemed to possess stronger negotiation power. Huawei and ZTE separately have two major product lines including mobile phones and mobile broadband modules. Coupled with strong ties with telecom operators, Huawei and ZTE have advantages to land orders for USB modems and therefore both possess stronger negotiation power compared to other players in the market.

Besides, 3G patent fees are the major factor affecting the FOB. Qualcomm will charge 3%-6% of product prices for using Qualcomm's patents depend on customers' shipment volume. To date, Huawei is at the forefront of providing mobile broadband modules and holds certain amounts of 3G patents. In addition, the company's subsidiary Hisilicon had successfully developed 3.5G mobile broadband chips. With the possession of some 3G core patents and its own chip suppliers, Huawei, therefore, only need to pay less patent fees to Qualcomm than other peers.

Consequently, the leading positions of Huawei and ZTE currently remain unchallenged. These two companies have products supporting all mobile broadband standards and it is anticipated, therefore, that the sales of standard mobile broadband modules manufactured by European and US players including Sierra Wireless, Novatel Wireless, and Option Wireless will not be too promising in the future.

New Functionality and Niche Markets to Generate New Growth Opportunities

Unlike other terminals such as mobile phones, netbook PCs, iPad-likes and Tablet PCs, which can rely on industrial design to improve their added value, the core function of mobile broadband modules is to provide internet experience. Mobile broadband module manufacturers have difficulties to create product differentiations, leaving them no choice but to initiate a price-war in a bid to compete with their rivals in the market.

Learning from Qualcomm Gobi's success, how to enrich users' online experience is a focal area that other companies can consider to develop. For instance, the addition of mobile volume control interface that is superior to competitors can help boost satisfaction of telecom operators and users. Furthermore, companies must pay attention to what 3G services that users may wish to add. Taking mobile TV as an example, Huawei and Chunghwa Telecom jointly launched a new data card, dubbed the E510, in October 2009. Other than HSPA broadband modules, the E510 also has a DVB-T (Digital Video Broadcasting-Terrestrial) demodulator, allowing users to receive and view DVB-T TV programs on computers after installing the embedded driver.

Besides, in order to ride the wave of mobile devices with an embedded mobile broadband module, module vendors are capable of fast responding to heterogeneity among different mobile devices in terms of hardware specs and software applications so as to identify a niche. With the range of mobile applications widening, mobile broadband modules are expected to continuously generate a certain level of revenues. In particular, even though mobile broadband modules are currently being widely used in mobile computing devices, it is anticipated that with growing demand for M2M services, high-speed modules may be incorporated into automobile or medical care segments to provide fast information transmission. Hence, for mobile broadband module companies, opportunities generated from these emerging market segments should merit some thought.

Appendix

Research Scope

This report covers major companies in the global mobile broadband module supply chain, including chipmakers and module manufacturers. Research scope focuses on mobile broadband modules for use in mobile devices (inclusive of netbook and tablet PC but exclusive of mobile phones), which are contained in the statistics presented herein. Shipment statistics are inclusive of mobile broadband modules supporting 3G/3.5G technologies but exclusive of other wireless technologies such as Bluetooth, WiFi, and WiMAX. In addition, 2G/2.5G technologies that currently are widely used on non-mobile devices are not contained in the statistics presented herein.

Definitions

Mobile Broadband Module

Mobile broadband modules are comprised of basebands supporting high transmission speed (3G or above mobile communications technologies, including WCDMA, HSPA, LTE, CDMA 2000 1x EV-DO), which will be then incorporated with RF and power amplifiers by module manufacturers. These modules can be either used to power data cards or embedded into any mobile devices, allowing these devices to possess wireless transmission capabilities.

Glossary of Terms

List of Companies