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Makers of single chips gain on rise in cheap phones

Cellphones equipped with a single chip to handle all their internal workings are increasing, which may spell trouble for the companies supplying more specialized chips.

These makers include RF Micro Devices Inc, STMicroelectronics NV and Skyworks Solutions Inc.

However, the news is good for Texas Instruments Inc, a leader in the single-chip movement.

Single-chip phones offer fewer features but have risen in popularity, especially in developing countries, where prices matter more and sales are brisk. Projections suggest that such phones could represent 20 percent of the total handset shipments by the end of next year.

"It's where the industry is moving at a noticeable pace," said Cody Acree, a semiconductor analyst at Stifel Nicolaus. "It's not something that's off in the future."

The move to a single-chip architecture is a natural progression for the semiconductor market and follows a similar track in the personal-computer industry, where companies like Intel Corp are developing chips with built-in graphics capabilities.

"Certainly people want fancy phones, but the bread and butter is at the low end," said Roger Kay, president and founder of market research firm Endpoint Technologies Associates. "Integration is always a threat to those that make discrete parts."

ThinkEquity Partners analyst Michael Burton said that he expects 20 percent of new cellphones to contain a single chip by the end of next year, and the gains won't be confined to low-end phones.

Dallas-based Texas Instruments agrees a single-chip architecture won't only be for cheap handsets. Alain Mutricy, vice president and general manager of Cellular Systems at Texas Instruments, said it also would find its way into midrange cellphones, largely in emerging markets.

Michael Markowitz, a spokesman at STMicroelectronics, a manufacturer of discrete components for cellphones, said that, by the time midrange cellphones start incorporating a single-chip architecture, the company should have a product available.

Brian Daly, vice president of marketing at Skyworks, said in an e-mail statement that for the "foreseeable future," a single-chip architecture will only be needed in the low-end "voice-centric" cellphone market.

Daly added that consumers' appetite for phones that include things like digital music players, cameras and video recording will drive the need for specialized chips.
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