Qualcomm's Acquisition Of Ikanos To Strengthen Other Areas

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Qualcomm has endured a difficult 2015 and we have seen the business move to rein in spending and costs following the loss of the Snapdragon 810 contract to Samsung and some disappointing smartphone and tablet sales of devices powered by the current Qualcomm flagship processor. However, Qualcomm is so much more than a System-on-Chip designer and has interests in many other pies, such as the broadband market. You see, a few weeks ago Qualcomm announced measures to cut $1.4 billion in costs a year but last week it announced the acquisition of a fixed broadband line chip maker, Ikanos Communications, for $47 million, plus the assumption of existing debts. Ikanos is described as a big name in broadband components but has been struggling against stiff competition in recent years. In 2012, it sold $126 million but this had shrunk to below $50 million in 2014. Ikanos was effectively bailed out last year by Alcatel-Lucent and Tallwood Venture Capital.

For Qualcomm, the purchase of Ikanos will sit alongside its WiFi chip unit and combine to form what is known as the “last mile” connectivity for customers. This means providing customers with technology covering the connection from the central office (often a street cabinet) right through to the WiFi network between router and WiFi-enabled device. Broadband providers are planning on moving to an integrated fixed / mobile networked future, with the potential (and requirement) to connect to many different devices at the same time, each requiring a low latency connection. For the carriers, an integrated solution covering everything from LTE operating in unlicensed spectrum, WiFi to small cell management and backhaul network connections is compelling.

Ikanos is also one of the key providers in key markets (Japan and South Korea) where is has the majority of the market for the chips behind the VDSL2 30a standard, which is a networking technology that could be capable of providing gigabit data transfer speeds across copper (although at the time of writing, this is only possible over a short distance). Ikanos has underdeveloped the technology, but with Qualcomm’s marketing, research and development budget behind Ikanos, the technology can be developed and expanded in capability. This potential will threaten a number of other businesses competing in the same sphere, such as Broadcom, Intel and Marvell. These three competitors have existing interests in the fixed broadband line / wireless component sector with their own ambitions. Broadcom, in particular, have inside a year found themselves tussling with Intel and Qualcomm for technology that it might once have considered to be an easy win. Broadcom and Avago are currently being merged and perhaps management will lose their focus on the market during this time. It is an ideal moment for Qualcomm to strike.