Who will be the final winner of NB-IoT chip?

The future is bright, but the present is cruel. NB-IoT has been around for three years, and during these three years, many people have been looking forward to it. When will the Chinese NB-IoT market explode?

Since 3GPP reached a consensus at the RAN plenary meeting in September 2015, NB-IoT has received support and response from most global operators, communication equipment manufacturers, chip manufacturers, and terminal manufacturers. This marks that a global IoT communication standard has been created and will bring huge business opportunities to the entire industry chain.

In order to cooperate with the industrial transformation and upgrading and trigger new economic growth points, operators took NB-IoT as a breakthrough point and launched large-scale NB-IoT module bidding to accelerate NB-IoT application and industrial development. As a result, module manufacturers launched a price war. In two years, the module price dropped from 70 yuan to 20 yuan, and the NB-IoT chip price dropped from 5 US dollars to less than 2 US dollars. It was really a failure before the mission was accomplished.

According to market sources, Huawei HiSilicon launched Boudica120, the first NB-IoT chip in China, in 2017 and has shipped 20 million chips to date, while the total shipments of other domestic NB-IoT chip manufacturers do not exceed 10 million chips.

The reality is far below expectations.

According to the latest data released by GSMA, in 2018, most of the global cellular IoT connections came from the existing 2G/3G/4G, with a total of 760 million IoT connections, and NB-IoT IoT connections accounted for less than 10%; but as time goes by, NB-IoT/eMTC is expected to gradually become the mainstream connection method in 2025, and the number of NB-IoT/eMTC IoT connections will reach 1.8 billion. Thanks to the vigorous promotion of the Chinese government, it is estimated that the Chinese market accounts for about 40% of the global market.

Number of global cellular IoT connections (unit: million; source: GSMA, IoT Think Tank)

It takes a process for a technical standard to be established and mature, and the transformation from a mature technical standard to an industrial standard requires the consensus and cooperation of upstream and downstream enterprises in the industrial chain. No one knows which year the NB-IoT market will explode in the seven years between 2018 and 2025, but relevant analysis points out that there are four main reasons that hinder or delay the explosion of the NB-IoT market:

1. NB-IoT network coverage is limited

In 2017, the Ministry of Industry and Information Technology required telecom companies to increase the deployment of NB-IoT network construction, to achieve the deployment of 400,000 NB-IoT base stations by the end of 2017, and to achieve the deployment of 1.5 million base stations by 2020. Currently, the three operators have deployed nearly one million NB-IoT base stations. Among them, China Telecom has built the world's largest NB-IoT network, with more than 400,000 NB-IoT base stations, but compared with 2G/3G/4G networks, the coverage is still very limited, affecting user experience.

2. NB-IoT Information Security Risks

The Internet of Things will make our lives more convenient and beautiful, but information security is a priority. While the development of NB-IoT makes applications more intelligent, it also brings information security risks. We must pay attention to the establishment of a security system from the application layer to each endpoint in the Internet of Things. The establishment of the NB-IoT information security system requires all participants in the entire ecosystem to work together to solve and establish it from network equipment, terminal data collection modules, data transmission and system solutions. The establishment of the NB-IoT information security system also takes time and process.

3. NB-IoT power consumption is not ideal

One of the main advantages of NB-IoT is its low power consumption. In current IoT products, people generally still use 2G modules. The power consumption of NB-IoT is slightly better than that of 2G, but it does not have an absolute advantage in real-time use at medium and high frequencies. There is no obvious difference in power consumption between the two. The power consumption of NB-IoT deep standby (PSM mode) is similar to that of 2G power-off mode. For the same main chip platform, the NB-IoT module is about RMB 5 more expensive than the 2G module, and users are not very motivated to replace it. With the current power consumption of the NB-IoT module, the battery standby time cannot support up to 10 years, so many new applications cannot be launched.

4. No one benefits from NB-IoT commercialization

Even if operators enable high-frequency service functions, the annual NB-IoT tariff can be increased to 35-40 yuan. Although the ARPU value (average revenue per user) of the IoT business is increased, the direct contribution to the operator's revenue is still very limited. Assuming that the three major operators have a total of 1 billion connections, under the most ideal tariff, the ARPU value of 40 yuan/year corresponds to 40 billion yuan in revenue. Compared with the current revenue of 1.4 trillion yuan for the three major operators in 2018, the NB-IoT tariff income is still not worth mentioning.

The price of NB-IoT single-mode modules is already below RMB 20. The cost is there, and it is no longer profitable for module companies, so they have to force chip manufacturers and component manufacturers. Since end-users are not willing to pay, the price elasticity of NB-IoT demand is very small. The price has dropped significantly, but the demand has not increased significantly, and economies of scale have not been achieved. No one in the entire industry chain has benefited, which has further affected the promotion of NB-IoT market.

NB-IoT is favored by the market for its low power consumption, large capacity, highly reliable data transmission, ability to penetrate building materials, and standardized wireless networks. At the same time, NB-IoT technology can eliminate intermediate data collectors and directly transmit data at fixed time intervals, improving convenience and reducing costs.

NB-IoT will be widely used in smart meter reading, fire protection system, smart parking, vehicle tracking, logistics monitoring, smart agriculture, forestry, animal husbandry and fishery, smart wearables, smart homes, smart communities, smart cities and other application fields. The following are the three NB-IoT applications with the highest market acceptance:

Smoke detector

Smoke detectors are currently the most compatible and widely used products for NB-IoT applications.

• Fire protection has requirements for the installation of smoke detectors in buildings. The dense distribution makes wiring difficult and costly. NB-IoT can help solve this problem.

• NB-IoT supports massive connections, and sensors detect smoke in real time. Once the smoke concentration exceeds the standard, information will be sent directly to the background through NB-IoT.

• NB-IoT has low power consumption and long standby time, which can reduce installation and maintenance costs; in addition, its signal penetration is strong and can cover remote corners of buildings.

Water vapor meter

GPRS smart meter reading solves the problem of manual meter reading of traditional mechanical water and gas meters, and NB-IoT solves the drawbacks of GPRS smart meter reading.

• GPRS communication base stations have relatively small user capacity, high power consumption, and poor signal. NB-IoT solves this problem.

• In terms of business, water and gas meters report data once a day at most, and some even report once a month, so the working mode of NB-IoT is very suitable for this business model.

• NB-IoT meter reading inherits the GPRS function and has 50-100 times the number of accesses compared to 2G/3G/4G. This is undoubtedly a better choice for communities with densely installed meters.

smart Lock

As the entry product of smart home, smart locks will become a must-have smart security product for every household in the future.

• NB-IoT uses DRX (discontinuous reception) power saving technology to reduce unnecessary signaling and does not receive paging information in PSM state to save power, which can ensure a battery life of more than 5 years.

• Using the NB-IoT solution, there is no need for a gateway or router. The smart lock terminal only needs one hop to connect directly to the operator's base station, making the network stability and security of the networked smart lock more guaranteed.

• NB-IoT signals can penetrate walls far better than existing networks. Even in places where traditional network signals are poor, NB-IoT networks can achieve "random passwords" through data transmission with high reliability.

Source: China Telecom

What are the chip manufacturers of NB-IoT modules?

Chip manufacturers of NB-IoT modules include NB-IoT chips and NB-IoT RF front-end chips .

NB-IoT chip manufacturers:

Domestic manufacturers: Huawei HiSilicon, RDA, Taiwan MediaTek, ZTE Microelectronics, Shanghai Yixin, Innovation Dimension, Core Wing Information, Pinecone Electronics, Zhilian Security, ASR, Goodix Technology

Foreign manufacturers: Qualcomm, Samsung, Altair, Sikuan, Nordic, GCT, Riot Micro, CEVA

The NB-IoT chip manufacturers that have shipped in large quantities in the domestic market are Huawei HiSilicon, Unisoc (RDA), and Taiwan MediaTek. ASR and Goodix Technology are both very strong, and their products are still under development. Jianyena previously had a strong marketing campaign, but eventually gave up.

The overseas NB-IoT market currently mainly uses Qualcomm platforms. It is expected that in the future, even overseas, the NB-IoT market will definitely be dominated by Chinese chips.

Information source: Internet of Things Think Tank

NB-IoT RF front-end chip manufacturers:

Domestic manufacturers: RDA, Hantianxia, ​​Huizhiwei, Feixiang Technology, Sanwuwei

Foreign manufacturers: Skyworks, Qorvo

SKY and Qorvo will eventually give up the Chinese NB-IoT market. Compared with domestic RF front-end chips, their performance is similar, but their price has no advantage at all. In the domestic NB-IoT module market, the RF front-end chips seen are basically domestic brands, and Unisoc (RDA) is the main supplier, but surprisingly, Vanchip and Airoha are not seen, and these two are the largest RF front-end chip companies in China. Therefore, the possible reason is that either Vanchip and Airoha do not value the NB-IoT market, or they are waiting for the opportunity to enter the NB-IoT market.

NB-IoT is characterized by low power consumption and low voltage application is the trend. The mainstream operating voltage of RF front-end chips is about 2V. Huizhiwei's technical advantage is that it is deeply familiar with SOI process and uses SOI RF characteristics and low voltage characteristics to develop competitive NB-IoT RF front-end chips. Hantianxia has also just released HS8018-31 CMOS PA for low voltage mode.

Sanwuwei's RF switches have entered the IoT smart home market. Its main product is 2.4G/5.8G WIFI FEM. Whether it will continue to enter the NB-IoT PA market remains to be seen.

Industry insiders believe that 2016 is the first year for NB-IoT commercial use. Just as the mobile Internet has longed for the arrival of the 4G era in the past decade, today's Internet of Things is also eager for a deep coverage and powerful NB-IoT cellular Internet of Things basic network. The more optimistic the future is, the longer the NB-IoT market introduction period, and the more chip manufacturers will participate in this market. At present, the NB-IoT market is still in the introduction period, and domestic chip manufacturers want to seize this market opportunity and become the final winner of the NB-IoT market.

The chip industry generally believes that it is important to enter the market first, but in fact, who reaches economic scale first is the most important. Economic scale is based on the existing production technology conditions. There will be an optimal production scale, which is the production scale with the lowest cost and the highest profit. In the domestic NB-IoT market, whichever chip manufacturer reaches economic scale first will become the final winner of the NB-IoT market.

1. The future mainstream of NB-IoT modules is still single-mode

Currently, there are NB-IoT dual-mode (NB-IoT + GSM or NB-IoT + eMTC) on the market, and NB-IoT triple-mode (NB-IoT + GSM + eMTC) has been proposed. According to industry analysis, the mainstream of the future development of the Internet of Things is still NB-IoT single-mode, accounting for about 60% of the Internet of Things market; NB-IoT + eMTC dual-mode may have some small market segment applications. As for NB-IoT + GSM dual-mode and NB-IoT + GSM + eMTC triple-mode, in my personal opinion, it will only be a transitional product and will not have a future.

NB-IoT single-mode is also divided into single-frequency solution and multi-frequency solution. The NB-IoT chip is the same, but the corresponding RF front-end chip is different. From the current application end, the demand for NB-IoT single-mode modules for single-frequency solution is similar to that for multi-frequency solution, which depends on the operator and the terminal application of NB-IoT module. The multi-frequency single-mode solution is about RMB 1 less in cost than the single-frequency solution, but it can cope with different operators and has great flexibility; the single-frequency solution can only correspond to a single operator.

2. NB-IoT applications support massive connections, and scale generates benefits

NB-IoT has the characteristics of massive connections of 100,000 users/cell. Due to the low-frequency, small data packet transmission application scenario, NB-IoT technology has been optimized. Compared with the 200KHz uplink of 2G and the 180KHz PRB (physical resource block) bandwidth of 4G, the narrowband technology NB-IoT uplink carrier bandwidth is only 3.75/15KHz, the equivalent power is greatly improved, and the channel capacity is increased by 50-100 times. NB-IoT reduces the air interface signaling overhead and improves the efficiency of spectrum utilization; the base station adopts independent access congestion control, as well as the uplink and downlink information storage of the terminal, which improves the stability and reliability of information transmission.

NB-IoT Internet of Things subverts the value chain and ecological chain, and the industrial value moves from the connection layer to the platform layer and application layer. At present, the promotion of the NB-IoT market is dominated by operators, and there will be benefits only when there is scale. In 2018, China Mobile Terminal Company issued a tender for the purchase of 5 million NB-IoT single-mode modules; China Unicom's NB-IoT communication module procurement scale is 3 million pieces; China Telecom adopts regional bidding, among which Jiangsu Telecom's procurement scale is expected to be about 2 million pieces of NB-IoT modules based on HiSilicon chips.

3. NB-IoT modules are not very different, the difference is in price

According to market statistics, there are more than 20 common NB-IoT module manufacturers in China: Xiamen Qijun, Shanghai Quectel, Neoway Technology, Fibocom, Gosuncn, Wutong Holdings, ZTE IoT, Shanghai Yike, China Mobile IoT, MeiG Smart, Datang Mobile, SIMCom, Longshang Technology, H3C, Lierda, Shanghai Kuanyi, Smart Haipai, Weiwen, u-blox, Sierra Wireless, Gemalto, Tailite, Ailink Technology, Xiaorui Technology, Shanghai Qingke, etc. The differences between the NB-IoT modules of each company are not big, and they are basically standard products. More than 90% are single-mode. Whether they support single-frequency or multi-frequency depends on how the module manufacturers correspond to the operators.

When NB-IoT modules become standard products, the price of the modules will be the key factor in the competition, especially in the bidding of operators. The difference in performance indicators is not mainly determined by the module manufacturers, but by the NB-IoT chip manufacturers. As long as the performance indicators of the chip manufacturers are similar, the performance indicators of the module manufacturers will not be much different.

4. The technical differences of NB-IoT chips are small, the key is power consumption and cost

NB-IoT's low rate, low power consumption, and narrow bandwidth mean low costs. Low rates mean that large or small caches are not needed to support chip operation, and the data processing requirements for DSP are also reduced; NB-IoT has a 20dB gain increase over LTE, which is equivalent to a 100-fold increase in transmission power, so the requirements for chip RF design are relatively low; because of the narrow bandwidth, there is no need to introduce complex equalization algorithms, and these factors can make NB-IoT chips smaller. NB-IoT does not have high technical requirements, far lower than 4G/5G chips. The main competitive points of NB-IoT chips are power consumption and cost, which provides a good opportunity for Chinese chip manufacturers. As long as the technology is not continuously iterated and upgraded, but focuses on one or two points, then this is where Chinese chip manufacturers excel, and the NB-IoT chip market will be the market for Chinese chip manufacturers.

The technical threshold is not too high, the technical differences are small, and the NB-IoT market introduction period is very long, which brings more domestic chip manufacturers full competition. There are more than 10 domestic NB-IoT chip manufacturers and 5 RF front-end chip manufacturers. There is no difference between the chips. From the mainstream NB-IoT single-mode module, it is difficult to find differentiated chip technology innovation opportunities. There are few peripheral devices on the module, and the space for chip system application innovation is also very limited. Then, homogeneous chip competition will only lead to price competition, which is based on cost. Chip cost is based on design technology and wafer process, as well as supply chain; NB-IoT chips cannot open up the cost gap in design technology and wafer process, and the principle of benefit greater than cost is the principle that enterprises should follow in their economic activities. Therefore, only the 2-3 NB-IoT chip manufacturers that reach economic scale the earliest can become the final winners.

Here, I would like to mention CoreWing Information Technology, the first NB-IoT chip manufacturer to launch an integrated CMOS PA. This innovation belongs to technical capability innovation. Many manufacturers can think of this idea, but there should be few manufacturers who are technically capable of implementing it. Unisoc (RDA) and MediaTek (MTK) have their own RF front-end chip R&D teams, and the NB-IoT chips they launched do not have integrated PA, indicating that there is a certain technical difficulty. Integrated CMOS PA will help reduce the cost and power consumption of NB-IoT modules, and these two points are the pursuit of all NB-IoT chip manufacturers. Once this road is opened, RF front-end chips will lose market opportunities.

The NB-IoT market has entered a red ocean before the blue ocean has opened. The long market introduction period and product homogeneity have led to this result. No matter what the ocean is, Chinese NB-IoT chips and modules will dominate the global market. There is a red ocean at home and competition outside. Chinese manufacturers must look to the world. Domestic competition is to make themselves stronger rather than consume their own vitality, otherwise they will be unable to compete with foreign manufacturers.

The Red Ocean is a perfectly competitive market in economics. Producers and consumers in a perfectly competitive market are both market price takers, so NB-IoT chip manufacturers and module manufacturers have to rely on each other and adopt low-price strategies to achieve economies of scale, thereby winning the market and ultimately forming an NB-IoT oligopoly market.

When a trend is discovered by most people, it becomes a popular trend, and more and more companies will participate in it. As a result, you either stand out or get out, there is no middle option.