There's no end in sight to mobile's evolution. The industry that's still transitioning from 3G to 4G is now quickly moving on to LTE connections. NVIDIA , which made its name in graphics processors, will have its first mobile processors with integrated LTE connectivity in phones by the end of this year. But will it drive gains for investors?
What the LTE is going on?
Strategy Analytics put out some very interesting figures at the end of 2012, highlighting that LTE smartphone shipment will triple in 2013 to 275 million units, up from about 91 million in 2012. The estimates show that LTE smartphone connections are quickly becoming the new standard, and the U.S., the U.K., Japan, China, and South Korea are leading the transition.
NVIDIA threw its hat into the LTE ring at the beginning of the year when it introduced the Tegra 4i, the company's first mobile processor with LTE integration. Although the chip won't be found in smartphones until the later part of this year, the fact that yet another company has entered the LTE market is helping to drive down the price of LTE devices. Up until now, most smartphones and tablets running LTE have been in the high-end market, but NVIDIA plans to release the processor in smartphones under $200.
The price-point shift could help push down not only LTE phones' prices, but other prices in the 3G and 4G markets. For NVIDIA's competitors, this may be such a great thing. Qualcomm , is a leader in 3G, 4G, and LTE chips, but it also receives royalties off of those wireless technologies. As prices come down, so does the amount of royalty revenue Qualcomm brings in.
But Qualcomm's processors are typically found in more high-end phones, and the company is deeply entwined with mobile leaders like Samsung and Apple, so NVIDIA's impact on Qualcomm should be minimal in the broader LTE market.
But there are more players in LTE than just Qualcomm and NVIDIA. Broadcom announced a new LTE modem chip in February and the company claims the chip is 35% smaller than any other LTE chip on the market. Smaller chips are typically cheaper and consume less power, both very attractive factors for OEMs. Broadcom also sells other wireless tech like Wi-Fi, near-field communications chips, and Bluetooth, and the new LTE chip will make the company an even bigger mobile player.
Recently, Intel entered the LTE market as well, but currently makes data-only LTE chips that will show up in products later this year. Intel will expand to multimode voice and data LTE chips by the end of this year, a bit behind others in the space. But the company held third place in mobile baseband revenue market share in 2012, and with additional LTE chips coming in 2014, Intel is quickly moving further into mobile.
Despite NVIDIA's help in driving down LTE device prices, the impact of this on NVDIA stock at this point is likely to be minimal. NVIDIA faces a lot of competition in the space. In 2012, Qualcomm took about 52% of revenue in the baseband market, followed by MediaTek and Intel. What investors should really be looking for is how many mobile device makers adopt NVIDIA's new chip. The company needs its first foray into the LTE market to go well, and failing to do so could significantly hurt the company's current mobile position.
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