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Cellular infrastructure: trouble ahead?

Despite the roll-out of third-generation wireless networks, analysis by ABI Research suggests trouble ahead for manufacturers of power amplifiers and RF power devices used in cellular base stations.

A "very difficult period" lies ahead for manufacturers of both RF power amplifiers (PAs) and RF power semiconductor devices used in cellular systems.

That s according to a down-beat report just released by US-based market analyst ABI Research.

The report provides sobering news in a week when the major manufacturers of GaAs-based RF devices reported generally positive financial results and Ericsson said that confidence had returned to the wireless market.

ABI s report focuses on the power devices and PAs used specifically in cellular base stations. While the cell phone handset market for PAs dwarfs that of the infrastructure market, ABI warned that the base station sector faces an "inevitable slow-down".

Despite the substantial roll-out of third-generation networks such as W-CDMA, ABI believes that total spending on cellular systems will actually fall as the large-scale deployment of GSM networks peters out.

"Due to an interplay between consumer usage patterns, system efficiencies and falling component costs, the net spending on RF power amplifiers will actually decline as the new networks are rolled out," said ABI.

And it will be the component suppliers, rather than the base station builders, that will bear the brunt of this slow-down, according to ABI analyst Lance Wilson. "For independent manufacturers and suppliers of RF power amplifiers, this is not good news," he said.

Wilson added that RF device manufacturers will face an even tighter squeeze as price erosion takes its toll. "Their only way out is to diversify into making other types of semiconductors that base stations also need," he concluded.

Wilson acknowledges that some PA suppliers have anticipated the slow-down with a move towards vertical integration to supply more of the base station.

In the III-V industry, the likes of Skyworks and RF Micro Devices have moved towards supplying more PA modules and entire front-end systems for cellular handsets and infrastructure, having traditionally concentrated on device manufacture.

ABI s report was released less than a week after comments from Ericsson, the leading base station builder, suggested that the wireless industry appeared to be in rude health. "Confidence has returned to the industry. Third-generation roll-outs, GSM capacity expansions and EDGE upgrades have created momentum," said Ericsson CEO Carl-Henric Svanberg.

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