RF device makers to face tough times - report

July 27, 2004

Manufacturers of the RF power amplifiers and RF power devices used in cellular base stations are in for a rough ride over the next few years.

This is the primary finding of a new study from ABI Research. The report, "RF Power Amplifiers: Equipment and RF Device Analysis for Cellular Infrastructure Markets", examines the state of the market for these essential cellular subsystems. It points to a very difficult period ahead for makers of both RF power amplifiers and RF power semiconductor devices.

According to ABI Research senior analyst Lance Wilson, one of the sector's main problems is the inevitable slow down of large-scale GSM deployment. While existing 2G cellular systems will be progressively replaced by 3G networks, net spending on RF power amplifiers - due to an interplay of consumer usage patterns, system efficiencies and falling component costs - will actually decline as the new networks are rolled out.

This tougher environment will not affect all manufacturers equally, says Wilson. "For the big OEMs making entire base stations, the RF power amplifier is only one part of the product. But for the independent manufacturers and suppliers of RF power amplifiers, this is not good news. However they must be given credit for anticipating that this would happen: they are trying to 'integrate vertically' to supply more of the base station."

The RF device manufacturers are, says Wilson, in an even tighter squeeze. "No matter whether the business goes up or down, the price pressure on them is so great that their problem is one of revenue. Their ASP is falling, and they are converting to lower-cost packaging that is going to drive prices even further down." Their only way out, concludes Wilson, is to diversify into making other kinds of semiconductors that base stations also need.