Industrial Analysis - Key RF Components

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4G smartphones have become the new favorite of popular consumer electronics in recent years. With one in every hand, they are the most popular electronic products. Telecom operators will gradually abolish 2G frequency bands in the next few years, so the popularity of 4G smartphones will increase further in the future.

Smartphones are also consumables, with a general life cycle of 2 to 3 years. The continuous wave of replacement will also ensure that the components of 4G smartphones will maintain a certain outlet.

In terms of wireless communication specifications, the frequency bands used by 4G are more complex than those of previous 2G and 3G products, and the development direction of WiFi towards dual band and multiple input multiple output systems (MIMO) is more established. Therefore, radio frequency (RF) related components will become a very critical component of smartphones in the future. The

key factor is not that RF components are very expensive. From the overall bill of materials of mobile phones, RF accounts for a small proportion, but once a small component fails, the entire mobile phone will be like scrap metal. In particular, RF component technology is mainly mastered by companies in the United States, Japan, South Korea and Taiwan, and it is difficult for other competitors to enter. Therefore, brand manufacturers and RF component suppliers must go through a long period of verification and long-term close cooperation, and it is difficult for new manufacturers to enter the existing market. In terms of

current key components, the most valued in recent years is the power amplifier (PA). Although silicon materials can still be used in 2G power amplifiers, gallium arsenide (GaAs) is used as the material for 3G and 4G power amplifiers. For example, Qualcomm's RF360, which uses silicon process, has failed a few years ago. The key position of gallium arsenide in the PA field has been further established.

In terms of certification, gallium arsenide PA machines require at least half a year to a year of long-term certification, and mobile phone manufacturers will not easily change suppliers. The threshold is relatively high. The PA market is almost monopolized by American companies, including Avago, Skyworks, Qorvo, etc., while domestic companies are mostly upstream wafer suppliers or their foundry manufacturers, and have a very close relationship with American companies.

In addition, another key component of RF components for 4G and WiFi is the filter. Generally, 4G mobile phones have reached the specifications of 5 bands and 12 modes. In order to avoid interference, the demand for filters has increased significantly. The patented technology of thin film bulk acoustic wave filter (FBAR) mastered by American manufacturer Aavgo has swept the 4G and WiFi high-frequency filter market, which shows that the market demand continues to be hot. In terms of surface acoustic wave filter (SAW Filter), although the filtering effect is not as good as FBAR, the demand for SAW in low-end and mid-range smartphones and even 2.4G Wi-Fi is also quite hot, and the market demand has continued to be strong in recent years.

Compared with FBAR, which is controlled by American companies, the main manufacturers of SAW Filter are mostly Japanese, Korean and Taiwanese companies. Because the price of SAW once plummeted in the past 2G era, most Taiwanese manufacturers withdrew from the market. The few Taiwanese manufacturers that continue to develop in the field of SAW Filter will have the opportunity to grow with the demand for 4G and WiFi.

In the case of quartz components, which have been the subject of price wars every year in the past few years, it is expected that the demand for VCTCXO (voltage-controlled temperature-compensated quartz oscillator) will be tight this year.

The main reason is that the potential suppliers of modem chips for high-end smartphones sold at the end of 2016 may use VCTCXO, which will benefit both Japanese and Taiwanese manufacturers. In addition, with the increasing demand in the Chinese market, the operating performance of domestic manufacturers that have focused on VCTCXO components this year is also worth observing.

As the application of 4G/WiFi frequency bands continues to become more complex, whether the future operating performance of related companies will continue to heat up with the growing industry trend is worthy of investors' attention.

(Business Times)

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