Picochip has unveiled new system-on-chip (SoC) baseband processors for femtocells aimed at dramatically cutting the cost of the mini home base stations, a move that could help tempt operators to place high-volume orders and commit to commercial deployments.

The vendor's first new SoC product is designed for High-Speed Packet Access (HSPA) femtocells, and supports 14.4 Mbit/s on the downlink and 5.7 Mbit/s on the uplink. PicoChip claims this chip enables the lowest bill of materials and lowest power for a femtocell available today.

“It improves performance, reduces power, and drastically reduces the bill of materials for a femtocell, but it’s based on what we did before,” says Rupert Baines, picoChip's VP of marketing. “This is not just because we’ve made the chip cheaper. A lot of it is integration.”

Baines says the new integrated chip can cut the bill of materials for HSPA femtocells by between 50 percent and 66 percent.

That magnitude of cost reduction is a big step on the way to reaching the magic sub-$100 price range for femtocells, the price point Vodafone Group plc (NYSE: VOD) has said is necessary before it would launch a full-scale deployment.

The move to cut femto chip costs also addresses one of Ericsson AB (Nasdaq: ERIC)’s key concerns about the home base stations. The Swedish vendor has said that one of the reasons it won’t offer a 3G femtocell until 2009 is the high cost of femto chips. (See Vodafone CEO Seeks Cheap Femtos, Vodafone Eyes Femto Service This Year, V'fone Trials Femtocells, Femto Chips Too Costly, and Ericsson Stalls on 3G Femtos .)

But picoChip's development isn't likely to help manufacturers hit that price point just yet: Femtocells aren’t likely to cost less than $100 until after 2010, according to the recent Unstrung Insider report, "Femtocells: U.S. Market Prospects." The report estimates that the current total femtocell cost per port is about $160, and the bill of materials is $105.

And, as with most technology developments, there are some compromises to be made.

The cost of integration
With a more integrated chip, picoChip sacrifices some of the flexibility that was built into its previous generation of femtocell chips, which are used by numerous femtocell product firms.

“It’s no longer a completely programmable device,” explains Baines. “It’s flexible and software-defined, so long as what you want to do is WCDMA [HSPA].”

But that tradeoff is worth it, reckons Heavy Reading senior analyst Gabriel Brown. He says it’s far better to have a chip that’s optimized and low-cost: “It’s essential,” he says. (See PicoChip Unveils LTE Femto Design and PicoChip Unveils Chinese Femtocell.)

PicoChip’s approach to femtocell chip development differs compared to other femto chip suppliers. For example, Airvana Inc. uses commercial components and adds its own software, while RadioFrame Networks Inc. designs its own silicon for its femtocell devices.

To Page 2

Going for the gateway
Heavy Reading's Brown reckons picoChip’s new generation of femtocell chips will be best suited for femtocell modules that are integrated into home gateways, because that's the most cost-effective option for operators in the long run. (See Femto Players Gun for Gateways, Netgear Gateway Goes Femto, Netgear, Ubiquisys Team, Thomson, IP.access Team, and Thomson, NSN Team.)

“The femto itself as a standalone device is OK for an early launch, but it won’t really be cost effective enough for a mass market,” says Brown.

Integrating a femtocell module into home networking gear helps drive down the price of the devices because there are several shared components. Heavy Reading estimates that the bill of materials for a femtocell module (before software costs) is expected to come down to about $50 towards the second half of 2009.

“To get to that price point, you need more integrated silicon,” says Brown. “And that’s really the application that picoChip is targeting with this new product. It will make the modules cheaper.”

Talking volumes
PicoChip's new product will be available in volume early next year, says Baines.

“When volumes start going into tens of millions of units, which is what the industry is talking about now for WCDMA, you need a very aggressive cost-reduction program,” says the marketing man. “People like AT&T Inc. (NYSE: T) are talking about 7 million units, and Vodafone is talking about similar units. You need lower-cost silicon to support those numbers.” (See Is AT&T Putting Out Femto Feelers?, Cisco, ip.access Prep Femto Combo, and Vodafone Picks Femto Vendors.)

Market potential still a topic for debate
But it’s still early days for femtocells. Nokia Networks head of radio access, Marc Rouanne, told Unstrung at a recent press event that “the femtocell market has not decided if it’s going to be big or not.”

Getting the price of the devices down is critical to the fate of femtocells. The market seems to be in a chicken-and-egg situation, where operators say they need cheaper femtos before they can commit to volume orders, but volume orders are needed to drive down the price of the devices. PicoChip’s new generation of integrated femtocell chips at least goes a way toward bringing costs down.

— Michelle Donegan, European Editor, Unstrung