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Nokia sells wireless modem unit to Renesas for $200m

Japanese giant shoulders most of cost in new LTE/HSPA R&D venture


Published: 6 July, 2010

READ MORE: M&A | Nokia | Renesas | Semiconductor | LTE

Nokia is to sell its wireless modem business to Renesas to improve its cost base radically, effectively outsourcing an element of its phones that used to deliver competitive edge, but has become increasingly commoditized. The Japanese vendor will pay $200m for the unit, and will remove a major cost from the Finnish giant by taking on 1,100 modem R&D professionals, based in Finland, India, the UK and Denmark.

Renesas will fill a gap in its wireless portfolio and boost its chances of being a major player in the 3G/4G cellphone market, where it lags well behind the giants like Qualcomm. It will also have the necessary manufacturing scale to bring Nokia's modem technology a bigger presence in high growth markets like embedded modules, dongles and wireless netbooks. Nokia is keeping its hand in on the technology side, creating a strategic alliance with its partner to develop modem technologies for HSPA+ and LTE. The pair have been collaborating on an HSPA+/LTE modem platform since Renesas licensed the Nokia modem last year, so the new deal builds on that partnership as LTE comes close to market readiness.

However, it is likely that Nokia will be free to shop around for its handset and internet device modems in future, though the precise details of the agreement are not known. This could broaden its recent multivendor strategy for cellphone processors, increasing its price negotiation power. This could further shake up the wireless modem market, which is already poised for a shake-up at the LTE stage. For instance, UK-based Icera has been widely tipped to gain significant market share because its software defined modem technology is very advanced, and many larger contenders do not yet have an LTE modem strategy in place.

As wireless becomes embedded in PCs and a host of other devices, the non-handset market for modems, from standalone dongles to modules, is booming. However, while Nokia has remained at the cutting edge in terms of new technology, showing off its first LTE modem last fall, it has fallen behind major rivals in terms of market share for non-phone devices like dongles. In particular, Huawei and ZTE are increasingly dominant, with 53% and 30% global share respectively, according to analyst firm Berg. Such players might more easily purchase modem chips from Renesas than from Nokia.

While improving the economies of scale of the Nokia unit, the transaction fills a gap in Renesas' own wireless components portfolio. This ranges from app processors to RF to power management, but Renesas continues to lag behind chip rivals like Qualcomm in the wireless space. Renesas gains modem technologies for LTE, HSPA and GSM, which have an installed base of billions of handsets plus dongles and modules.

This agreement "enables Renesas to maximize the value of Nokia's technology assets and engineering expertise", says the joint corporate statement, by combining these with the Japanese player's "market proven multimedia processing and RF technologies. Together with Renesas Electronics' robust line-up of application processors, RF transceiver ICs, high power amplifiers, and power management devices, the wireless modem technologies enable Renesas Electronics to deliver a complete mobile platform solution to the market." The deal is expected to close in the fourth quarter, subject to regulatory approvals.

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