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Jul 08, 2010

Altair Semiconductor – leading the development of LTE chipsets – Optical Keyhole

Optical Keyhole

July 8, 2010

Interview with Eran Eshed, co-founder and VP Marketing and Business Development

Introduction

Altair Semiconductor of Hod Hasharon, Israel, was founded in May 2005 by former Texas Instruments executives to develop low power, small footprint 4G semiconductors based on a patent pending Software Defined Radio (SDR) architecture.

The company’s products include baseband processors, multi-band RF transceivers and a range of reference hardware and product level protocol stack software for LTE, mobile WiMAX and XGP.

LTE roadmap

Of Altair’s three product lines – WiMAX, XGP and LTE – LTE has been Altair’s clear focus for the past three years and continues to be the case.

Although there has been much debate in the industry on the dynamics of 4G technology and the relative merits of WiMAX and LTE, Altair believes it is evident that LTE is, and will be, the mainstream 4G technology.

In contrast to many of it’s competitors, Altair did not shift recently to LTE, which has been on the company’s roadmap since Altair’s inception. In fact, development of the LTE chipset and software began in 2006.

At that time Altair was investing in LTE mainly without returns but is now starting to see the fruition of its early strategy and believes the advantages will be substantial to the company’s future from next year when revenues start being recognised.

Mr. Eshed emphasised that the complex development of LTE technology is expensive and takes time. Most of the chip vendors coming from a WiMAX background argue that WiMAX and LTE are similar in nature, he said, however Altair considers that the devil is in the detail and that transferring a WiMAX chip to support LTE would be a time consuming and costly project.

Competitive advantage

Looking at the competitive landscape today in the area of LTE semiconductors, Mr. Eshed claimed that Altair has a clear leadership over both small companies – old competition from the WiMAX space – as well as larger and more established companies such as Qualcomm and ST-Ericsson. He attributes this to two main areas:

“We started investing early, so we’ve had a chipset since September 2009 on which we’ve been doing much trial and interoperability testing”.

“Also, Altair’s architecture is based on a unique processor that we developed in-house, which is a software-defined radio (SDR) proprietary DSP that allows us to update and upgrade as we go”.

“We could tape out a chip relatively soon and not worry about having everything implemented and tested as we have that amount of flexibility and programmability in the chip that allows us to enhance and develop as we progress”.

Additionally, Mr. Eshed said Altair’s SDR programmable platform combines high flexibility with high power efficiency. SDRs have traditionally suffered from poor performance, cost and power and some of them were simply a brute-force combination of DSPs.

Altair’s architecture is different, and employs a novel approach to addressing this paradigm, leveraging the same knowledge base the company gained by designing the lowest power chipsets in the WiMAX and XGP space, allowing it to reduce the power requirements for LTE.

In terms of the technical lead Altair needs in order to compensate for the scale advantages of companies such as Qualcomm, Mr. Eshed said as a small company, Altair needs to be realistic with its expectations.

Both companies develop products in the LTE space but Altair does not compete directly with Qualcomm and is not attempting to so.

Instead, Altair is concentrating on carving the markets in which it does have an advantage – specifically with the LTE baseband processor and LTE RF transceiver chipsets designed to address any type of LTE deployment worldwide, be it TDD or FDD in any frequency band between 700 MHz and 2.7 GHz.

In many end markets, backwards compatibility is often not required. Citing India as an example, Mr. Eshed noted that GSM/EDGE is commodity IP, 3G will likely not be needed and Altair can leverage the very low cost structure of its chipset and the power consumption advantage in such markets.

Market focus

In Europe, with the Digital Dividend spectrum*, deployment is based on addressing rural broadband access. Verizon also is attempting to cover not only its existing 3G footprint, but to extend the broadband service penetration to areas where it does not have a presence today.

Alternatively, Altair thinks there is a market for standalone LTE, LTE/2G and LTE/3G and the company is attempting to play a significant role in each market.

Within the different variants, TDD is an example of a niche market, with more than a 1 billion addressable subscribers.

Business strategy

Altair’s focus is to build a robust and forward thinking business as a standalone company that can create value for its shareholders, though is not unwilling to sell technology to more established players in the market should the situation arise. However, Mr. Eshed emphasised:

“If we aim towards acquisitions, we’re going to fall short. It’s not a good target to aim for; we’ve been asked many times what our strategy is and how we’re going to deal with the lack of legacy – we do have a competitive strategy of how to enter into the multi-mode aspects. In the interim, we found that there’s an effective, interesting and profitable market for LTE-only deployments”.

A focused business model is important to the company. Altair plans to remain an established chip supplier and any activities the company decides to become involved in will be through partnerships and joint ventures.

Mr. Eshed believes the company will mature over the next two years when chipset performance will have been optimised and Altair will be further along the road towards full realisation of its solution compared to the competition, which in general either does not have working solutions or is in the very early stages of testing.

He noted that when a market becomes commoditised, it becomes more difficult to compete and cost becomes of major significance to purchasers.

In comparison to what has happened in WiMAX and the 3G market, Altair believes its cost structure is extremely competitive.

Fabless model

In general, Mr. Eshed sees no disadvantages to the fabless model adopted by Altair. In the ten years he spent at TI, he observed a key disadvantage with that corporation’s ownership of a fab was that they were required to use it and as a result capacity issues arose.

Altair can use whatever fab it wishes and working with Tier 1 fabs can mean an effective supply and reasonable prices without the burden of heavy debt.

Although the company has no plans to move between different fabs, Mr. Eshed noted it would be possible, and that there is no strategy officer or supply chain management officer restricting the possibility.

LTE ecosystem

Mr. Eshed further recognises that new technology requires the cooperation of many members of the ecosystem to get off the ground. Altair has developed a chip that is early in the market and is effective, but without the surrounding components it is useless.

Because Altair is working within the radio access network, interoperability with base station vendors is a key area and this is where Altair invests resources, Mr. Eshed said,

“This is something that not only helps the industry – as both solutions become mature – its a smart cooperative move as the base station vendors we work with have an interest and motivation to work with us, as they need us and we need them”.

“Further down the road, they may not, as their solution may have matured so the chip suppliers of the second and third wave will have a very difficult time finding IOT capacity. This is baseline stuff – getting into trials and carrier related activities. Base stations are the first thing”.

Ultimately, as Altair develops its chipsets, they have to be integrated into devices, whether its CPEs, dongles, smartphones or MIDs. They therefore need the ‘front end’ – the power amplifiers, filters and duplexers, antennas and power management.

Mr. Eshed commented that all these aspects mean the chain can have its weak links. Altair’s solution, for example, relies on effective and efficient antennas and support with certain frequency levels etc., otherwise the company cannot deploy.

Altair is therefore in constant contact with channels and device makers to ensure that the most mature reference designs are used to build devices using its chipsets.

Executing the business plan

Mr. Eshed perceives the LTE market as no different to 3G in terms of the process from initial rollout to maturity, however there is a difference in the pace of maturation. With LTE, he said, the investments are higher, the pace is faster and in the next couple of years LTE will dramatically increase in volume.

When asked if Altair would likely be financially viable up to that point, Mr. Eshed said the company has enough revenue to execute its business plan, which assumes it will become cash flow positive at some stage.

Concluding, Mr. Eshed commented that Altair has the financial strength and an effective business plan to succeed and become a leading supplier of wireless semiconductors.