NVIDIA And ICERA Create Serious Competition For Qualcomm And Others

With NVIDIA's acquisition of Icera Semiconductor today, they have taken an important step in developing a fully optimized mobile platform with two key technologies. The chipset and the baseband processor are two of the most important decisions a company makes when they are looking to develop a mobile solution. NVIDIA has now positioned themselves to offer a competitive solution with both key technologies.

Icera's baseband and RF technologies offer solutions for 2G, 3G, and 4G networks. Icera competes directly with the likes of Broadcom, Qualcomm, MediaTek and Intel with the Infineon modem acquisition. On the analyst conference call this morning hosted by NVIDIA's CEO Jen-Hsun Huang, he discussed the complimentary nature of the two technologies and the two companies. In a quote to the press he said:

"Icera is a perfect fit for NVIDIA. Our businesses are complementary. Icera has the right team, with a strong, proven track record. And their nimble, entrepreneurial, engineering-focused culture mirrors our own," he continued.

The primary reason for this acquisition is to support and compliment NVIDIA's Tegra mobile processor. The glaring question, and what I will be watching closely with this acquisition is to what degree NVIDIA integrates the Icera modem onto the Tegra SoC. This is one of the benefits of Qualcomm's SnapDragon processor where the integration of the CPU and the modem offer an optimized solution for OEMs.

NVIDIA could now be in a similar situation with this acquisition to offer a more fully optimized platform based on NVIDIA's unique differentiation with their Tegra SoC. One of the more compelling parts of the Icera solution is the emphasis on baseband speed and performance at an extremely low power. The primary claim of their third-generation Livanto line of chipsets is that it delivers the industry's fastest data rates, cuts user wait times, reduces battery drain all while supporting multiple standards on the same hardware.

From a strategic standpoint this is very interesting and could make NVIDIA's Tegra solution even more compelling as a platform fully optimized for mobile. From a business standpoint the market for baseband processors is one of the fastest growing segments of the technology industry. This segment is worth an estimated $15 billion a year and NVIDIA now owns one of the hottest companies capitalizing on that growth.

By combining two companies who create leading edge solutions in application processors and baseband processors, NVIDIA can now offer their customers quicker time to market as well as an optimized mobile solution. Interestingly, by adding revenue from the baseband processor NVIDIA can potentially double their revenue on each device.

From my perspective as an analyst, I will be closely watching what decisions NVIDIA makes in developing this solution to get design wins for both their Tegra SoC and baseband modem. This acquisition has the potential to be a real differentiator for NVIDIA, and as we see more devices like tablets and next generation PCs require baseband modems, NVIDIA will have a solution for the sweet spot in the market.