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Comms chips

Agere Eyes the Silver

Agere Systems Inc. (NYSE: AGR.A) is talking up plans to wrest second spot in the radio frequency (RF) power amp transistor sector from Philips Semiconductors (NYSE: PHG), despite a relatively late market entry only twelve months ago.

Last March the vendor unveiled a range of 21 chipsets targeted at base-station vendors and dedicated power amp module manufacturers like Andrew Corp. (Nasdaq: ANDW). (See Agere Challenges Amp Champ.)

The company has announced two commercial contracts to date -- with NEC Corp. (Nasdaq: NIPNY; Tokyo: 6701) and Sewon Teletech -- and claims to have trials with “more than 25 customers, including nine of the top 10 OEMs and eight leading power amplifier manufacturers.” (See Agere Amps Up NEC and Agere Inks Sewon Deal.)

The latest numbers from Allied Business Intelligence Inc. (ABI) give Motorola Inc. (NYSE: MOT) a dominant 50 percent market share for base-station power amp transistors, worth about $580 million annually. Philips Semiconductors and Infineon Technologies AG (NYSE/Frankfurt: IFX) take the second and third spots.

“We can’t give exact numbers for second and third place, but it's fair to say that Philips trails Moto by a significant amount,” says ABI’s director of research, Ed Rerisi.

Louis Donofrio, senior manager of RF power marketing and business development for Agere’s analog products division, claims that the vendor will be challenging Philips within the next two years and even has its sights set on the top spot.

“We believe we can be a strong number two,” he tells Unstrung. “Our plan is to hit this within two years... Our goal is also to be number one at some point.”

Analysts are slightly less optimistic, noting that the vendor must prove its worth in the next twelve months. “They didn’t gain much traction in 2003 despite a lot of trials, so 2004 is the year for them to make a name for themselves,” comments Rerisi. “Fortunately for them, it happens to coincide with an overall uptick in market demand for wireless infrastructure. That said, it will still be a challenge for them.”

As for eventually battling the might of Motorola, Rerisi is keen to stress the size of such a task. “Motorola is the 800-pound gorilla. Agere is doing a lot of things right, but it is still an uphill battle for them when it comes to unseating Motorola.”

Power amplifiers crank up voice and data signals in base stations, using power amp transistors that are about the size of a nickel. Agere claims it has managed to reduce the power requirements of its transistors by making them thinner, using a proprietary manufacturing technique. As a result, its transistors can apparently run 10 to 15 percent cooler than the competition, enabling vendors to produce smaller and more energy-efficient base stations.

— 800-pound Springham, Senior Editor, Europe, Unstrung

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