The next billion mobile phone users

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Aubrey Nicholson
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1 Technology for Innovators TM The next billion mobile phone users Providing affordability and features for wireless handsets in emerging economies By Sunil Hattangady Strategic Marketing Manager One of the greatest areas of growth for wireless communications over the next few years will be in emerging economies, where large populations with rapid development offer enormous opportunities. To serve these emerging economies, handset manufacturers and service providers will need products that are both low cost and feature rich. Such a wide range of products can be derived effectively from an open-architecture approach based on global system for mobile communications (GSM) the most widely used, fastest growing wireless standard in the world. GSM is ideal for emerging economies because it is an open standard that encourages flexibility and competition. Texas Instruments (TI) offers a breadth of GSM products and in-depth GSM expertise, and is well positioned to meet the cost and feature requirements of emerging economies. TI has the advanced process technologies and manufacturing strength needed to achieve high levels of integration and economies of scale, which in turn can help make wireless handsets more affordable. In addition, TI designs its solutions to scale quickly in order to support handsets ranging from inexpensive voice-centric phones to mid-range feature phones to high-end smart and multimedia phones. W H I T E P A P E R Providing connection and more for the world Throughout the world, mobile phones have become the preferred means for staying connected. In addition to enabling phone conversations, the rapidly growing market for mobile communications has created and grown markets for related products. For instance, downloadable ring tones have become a multi-billion-dollar market. And in 2006 (when more than 950 million handsets were sold), more MP3 phones and camera phones were sold than stand-alone MP3 players and digital cameras. The mobile phone has become the most favored platform for innovation with new features being added every day because consumers have embraced mobile phones with enthusiasm and it is the one device they typically carry on their person. These features include customized ring tones with music or voice, digital radios, digital cameras and camcorders, WLAN connectivity, mobile TV, security solutions, and the ability to download, store and play music and

2 2 videos. These features offer additional entertainment and productivity for consumers as well as additional revenue opportunities for operators through value-added services. For wireless handset manufacturers, new services drive premium product development, just as growth in basic services drives cost reduction. Manufacturers continue to turn to semiconductor vendors to help lower production costs while increasing value in handset products. Growth in emerging economies Populous countries with growing economies offer the greatest growth potential for wireless communications over the next few years countries such as India, China, Russia, Brazil and others in Latin America. According to the GSM Association (GSMA), more than 3 billion people in the world live in areas of wireless coverage but cannot afford wireless services. Clearly, this unconnected population stands to benefit from access to the convenience and flexibility of mobile phones, if only phones and services were affordable for them. In addition to benefiting consumers, mobile phone services offer advantages to infrastructure development, eliminating the cost of installing expensive landlines and enabling more rapid deployment of subscription services. As wireless handsets become more affordable, estimates indicate that several hundred million low-cost and ultra low-cost handsets will be shipped by 2010, allowing citizens in developing countries to gain access to wireless communications. India and China are particularly important markets because of their favorable economic growth rates and rapid accumulation of wealth in the middle classes. Despite their status as the world s most populous countries, to date they have low wireless penetration rates. Less than 20 percent of India s 1 billion people have wireless phones, although these numbers are expected to increase by million users per year between 2007 and 2010 (isuppli 2H2006). China is somewhat further along in penetration, with more than 400 million mobile users; that number is expected to increase to 600 million by Both countries have also stated goals for the rollout of wireless services that will bring rural and poor areas into the phone network and provide extended communications services. Along with markets in other developing countries, India and China represent the future of growth for the wireless industry.

3 3 Next billion users to come from emerging economies Population M 128 M 398 M 570 M 1,324 M 1,120 M 1,230 M Subcriber Pentration Rate (%) North America Japan Europe Latin America China India Africa and Middle East Chart Source: isuppli, 1Q07 Low-cost phones critical for emerging economies (>82% of next billion subscribers) GSM Association ULC phones awarded by GSMA s Emerging Market Handset Initiative are based on TI s platforms Wireless markets are becoming saturated in industrialized countries, while large populations in developing areas are still underserved. Although a tremendous demand for low-cost phones exists in developing countries, it would be a mistake to think that only basic voice-only services are needed in these markets. The emerging middle classes want the same value-added features as are experienced by those in more industrialized countries, in low-cost handsets. Therefore, demand for value-added features will only increase. To serve emerging economies, handset manufacturers and service providers will need both low-cost and feature-rich solutions. As a result, it is important that the enabling silicon technology provides for both cost-efficiency and scalability in performance and functionality to support more types of services.

4 4 Open standards and architectures help open markets Emerging economies are best served by technologies that permit innovation and faster adaptation to local conditions. This need for flexibility is an important reason why GSM has become so popular. GSM technology supports differentiation and encourages competition both beneficial traits in emerging economies. GSM s inherent flexibility combines well with an open-architecture approach in the underlying technology, encouraging feature innovation and product lines that are easily scalable to support a range of services. More than 2 billion people around the world in more than 210 countries are now connected using GSM, representing more than three-fourths of the world s wireless market. This ratio holds in India, where the standard has more than 100 million subscribers, and there is a large installed base in China as well. GSM is a good fit for these and other emerging economies for several reasons: It helps service providers achieve a fast ROI; as an open standard, there are no licensing fees. GSM solutions are available from a large number of vendors at competitive prices. The standard allows consumers to switch operators readily, creating an innovative and competitive business environment. GSM supports a broad range of differentiated services and applications accessible by a wide variety of handsets. Emerging economies are not a one-size-fits-all opportunity, so the industry must be prepared to address not only handset affordability through economies of scale, but also consumer preferences for a wide range of features. As a target for the low end, the GSMA s Connecting the Unconnected campaign and the Emerging Markets Handset Initiative are calling for handsets priced below $30. GSM phones meeting these aggressive goals will focus on voice, offer basic ring tones, and use black-and-white displays. As single-chip technology becomes more prevalent, more advanced features such as color screens and MP3 ring tones will be available at price points under $20. In the middle range at $30 to $70 and above, phones will include interesting additional features: GPRS to EDGE, VGA to 1.3-megapixel cameras, MP3, basic video and 2D games. At the high end of the low-end segment (beyond $70) will be so-called feature phones with superior multimedia and connectivity features: 2- to 3-megapixel cameras, high-quality audio and video including streaming, 3D games, Bluetooth and Wi-Fi connectivity, and digital TV reception. All of these handset levels will be in demand in emerging economies just as they are in mature markets, even though the requirements of individual regions are likely to differ.

5 High-growth emerging economies voice and features Multimedia Feature $70 and above EDGE High Resolution

3 Megapixel VGA MP3 Bluetooth Ultra-Low Cost <$30 GSM Basic None FM Handset Transfer Price Modem Display

the enabling technology, allows flexible support of a wide range of handset products and services.

emerging market requirements should note that semiconductor vendors can help reduce costs while supporting

TI is positioned to meet the requirements of emerging economies because of the company s single-chip

the industry-proven OMAP and OMAP-Vox families of processors.

necessary for more affordable wireless handsets.

5 5 High-growth emerging economies voice and features Multimedia Feature $70 and above EDGE High Resolution Color 2-3 Megapixel Music Video Wi-Fi Basic Phone $30-$70 GPRS Color 1.3 Megapixel VGA MP3 Bluetooth Ultra-Low Cost <$30 GSM Basic None FM Handset Transfer Price Modem Display Camera Video/Audio Gaming Security Connectivity The open GSM standard, coupled with open architectures in the enabling technology, allows flexible support of a wide range of handset products and services. Technology for cost-efficiency and robust features Handset manufacturers searching for solutions to meet emerging market requirements should note that semiconductor vendors can help reduce costs while supporting additional features and simplifying development across an entire product line. TI is positioned to meet the requirements of emerging economies because of the company s single-chip platforms founded on TI DRP technology, support for multi-radio integration, and multimedia expertise with the industry-proven OMAP and OMAP-Vox families of processors. In addition, TI s manufacturing strength continues to enable levels of integration and economies of scale necessary for more affordable wireless handsets. TI has state-of-the-art CMOS processes (65 nm today, ramping to 45 nm in 2008) devoted to processors for wireless communications. Every rescaling reduces semiconductor silicon area, lowers power requirements and increases performance for wireless phones. TI s advanced processes are also designed to integrate analog components from the very beginning and to add more analog capabilities as the process matures. On-chip analog components permit the integration of a wider range of system functions, further reducing design size and power.

6 6 Electronic devices chips and passives account for about half the cost of a wireless handset. TI s LoCosto single-chip product family reduces the electronic bill of materials by more than 20 percent, enabling handset manufacturers to significantly drive down costs. The LoCosto family of products not only integrates functions traditionally found in wireless processors, but essentially combines all major wireless signal blocks into a single piece of silicon. In addition to integrating both digital and analog baseband functions, LoCosto also integrates the RF using TI s exclusive DRP single-chip technology, which implements the handset s radio through the digital CMOS process. The introduction of the LoCosto ULC family further reduces electronic bill-of-materials costs by as much as an additional 25 percent. LoCosto ULC platform further integrates the Power Management Unit (PMU) into a single device. Single-chip designs using TI s advanced technology are in widespread use today for low-cost phones, but affordability is only part of the story. Multimedia applications are in demand across all markets segments. Leveraging its expertise in supporting advanced multimedia capabilities, TI products are designed to scale readily, supporting handsets ranging from inexpensive voice-centric phones to mid-range feature phones to high-end smartphones. Scalable OMAP-Vox processors deliver high performance and power efficiency for low-cost feature phones and smartphones, with easy configuration for market requirements. OMAP-Vox processors allow handset manufacturers to provide a robust user experience for voice, multimedia and connectivity applications. Complete hardware and software reference designs simplify implementation and save time to market. TI s integration technology further supports the design of multi-radio systems. Initial multiple radio solutions will combine connectivity offerings such as Bluetooth and FM stereo receive and transmit, as well as WLAN, Bluetooth and FM stereo. When these and other radios are added inexpensively to mobile phones, the result will be connectivity anywhere, via any available network technology, when the market demands. Additional flexibility is provided, with connectivity for Bluetooth, Wi-Fi, A-GPS and a cost-effective mobile TV solution optimized for open TV standards such as DVB-H and T-DMB. With a history of providing GSM/GPRS solutions for more than 15 years, TI is an industry leader in GSM innovations. TI has shipped more than 500 million 2G and 2.5G cellular system solutions worldwide. Through industry organizations, TI supports GSM open markets and business models because

7 7 Wireless solutions for emerging economies they offer cost-effective, flexible solutions with greater choices, better value and more opportunities for innovation. In keeping with the goals for wireless growth in developing countries, TI s GSM products help open up the possibilities for mobile technology, enabling operators and manufacturers to be more successful. In fact, the low-cost phones awarded by the GSMA for the Emerging Market Handset Initiative are all based on TI platforms. TI s wireless products support a wide range of capabilities in wireless systems. The LoCosto platform, discussed in the previous section, combines an ARM7 general-purpose RISC processor core with a TMS320C54x DSP core. Operating at 104 MHz, LoCosto devices achieve high performance with low power consumption. The LoCosto TCS2300 GSM solution supports standard voice codecs in dual-band phones as well as the normal complement of features demanded in basic phones, including color and monochrome displays, MIDI 16 polyphonic ring tones, system security and a highly optimized memory footprint. In addition to economy, the LoCosto GSM solution offers a scalable platform for the development of products ranging from very low-cost GSM phones with black-and-white displays to slightly more expensive handsets with color displays and FM radios. These products, at less than $40, lower the threshold for adoption by the next billion subscribers in emerging economies. The LoCosto TCS2310 GPRS solution provides a complete set of functionality for entry-level handsets. Features include support for MP3/AAC ringers and players, MIDI 32 polyphonic ring tones, non-removable and removable mass storage media, 1-megapixel camera, basic video playback and camcorder functionality, and connectivity support including USB 2.0 and Bluetooth. The scalable LoCosto GPRS platform enables cost-effective development of differentiated handsets addressing multiple market segments: low-cost GPRS phones with black-and-white displays, entry-level GPRS handsets featuring basic VGA cameras and MP3 players, and high-end GPRS systems with features including 1-megapixel cameras, video, and advanced connectivity such as Bluetooth, WLAN or A-GPS. The new TCS2315 and TCS2305 LoCosto ULC solutions are designed for the ultra-low-cost market, leveraging an advanced 65-nm process. Supporting GPRS and GSM, respectively, these solutions enable handsets with high performance, robust functionality and innovative form factors in the most price-sensitive handsets. These solutions include a truly

8 8 Single-chip LoCosto scalable platform Video and Music MPEG Megapixel Camera MP3/AAC MIDI32 Camera and Music GPRS VGA Camera MP3 USB 2.0 Voice GSM, Black and White /64k Colors SAIC, MIDI16 4-Layer PCB Hardware Security No external multimedia co-processor No external multimedia co-processor Lowest cost color No external SRAM The LoCosto platform integrates the entire signal chain, including RF, into a single chip and scales to support basic to mid-level handsets. compelling user experience, featuring a relatively high-resolution color display without requiring additional external SRAM. TI s LoCosto ULC solutions make advanced features within reach of even the lowest cost handsets features such as VGA camera support, MP3 playback and mass storage (SD/MMC) support, USB and Bluetooth connectivity, high-end full duplex speaker phone, longer talk time and standby time, stereo FM radio connectivity, and USB charging. TI s OMAPV1030 EDGE solution delivers enhanced multimedia for cost-efficient GSM/GPRS/EDGE handsets used by mainstream wireless users. The OMAPV1030 solution is one of the industry s lowest cost solutions and is highly optimized for EDGE, providing the performance needed for access to high-quality multimedia, while power efficiency helps prolong battery life. Capabilities delivered include 2-megapixel digital still images, high-quality video capture and playback as fast as QVGA 15 fps, video streaming downloads, interactive 2D/3D gaming and more. The single-chip OMAPV1035 solution is the first to integrate a GSM/GPRS/EDGE modem, digital RF and application processor functionality on the same silicon. The new platform builds on TI s LoCosto single-chip cell-phone solution and the multimedia capabilities of the OMAP-Vox

9 9 processor. The superior functionality delivered by the single-chip OMAPV1035 solution includes 3-megapixel camera support, rich video and streaming, high quality 2D/3D gaming, and advanced connectivity support for WLAN, mobile TV and A-GPS. The OMAPV1035 solution shares a common software platform with OMAPV1030 offerings, thus enabling faster and more cost-effective feature phone development in high-growth markets. Common to all of these products is the TI application suite ecosystem, designed to bring complete system offerings based on best-in-class applications suite solutions. These solutions offer a high degree of flexibility in feature sets for both emerging and established markets, enabling cost-effective delivery and reduced time to market. All solutions employ TI s M-Shield hardware security to protect with secure flashing and booting, terminal ID (IMEI) protection, network lock (SIMLock) to defeat malicious attempts to unlock the handset s SIMLock code, and Digital Rights Management (DRM) to protect valuable content. Solution portfolio spans multiple markets Legacy Products High Volume Today Coming Soon MULTIMEDIA FEATURE PHONE OMAP850 GPRS/EDGE OMAPV1030 GPRS/EDGE ecosto OMAPV1035 EDGE Single Chip BASIC/ENTRY PHONE TCS2200 GPRS LoCosto TCS2310 GPRS Single Chip LoCosto ULC GPRS TCS2315 GSM/GPRS Single Chip New! ULTRA LOW-COST PHONE TCS2100 GSM LoCosto TCS2300 GSM Single Chip LoCosto ULC GSM TCS2305 GSM Single Chip New! 130 nm 90 nm 65 nm TI solutions offer a wide range of options for competitive designs at all feature levels in emerging economies.

10 10 Conclusion As economic development continues around the world, more and more consumers want to enjoy the advantages of wireless communication, offering handset manufacturers and service providers enormous opportunities for future growth. Many potential subscribers simply want basic phone service at a low price, while others are looking for cameras, video, music, gaming, Internet access, radio and TV reception, and other value-added features. Using the GSM standard for wireless services offers great flexibility in implementation and application, and can help drive deployment and innovation to the overall benefit of the market in that area. To meet the needs of emerging economies, manufacturers should look for chipset solutions offering not only cost-efficiency making handsets affordable to more people but also scalable architectures that support adaptation to market requirements for more features. TI s advanced process technology, open-architecture platform, and demonstrated GSM leadership all combine to create a product line that offers affordability, flexibility and scalability for emerging economies. TI s broad portfolio of wireless chipset products will play a key role in enabling the wireless industry to serve the next billion subscribers. TI offers a broad wireless portfolio enabling cost-competitive handsets for all market segments in emerging and established economies TI s single-chip wireless platforms allow for differentiated handset products and reduced development costs TI is the wireless market leader with more than 500 million solutions shipped to date Statements contained in this white paper regarding the growth of the 3G handset market, TI market penetration and qualification of TI products and other statements of management's beliefs, goals and expectations may be considered forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995, and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. The following factors and the factors discussed in TI's most recent Form 10-K could cause actual results to differ materially from the statements contained in this white paper: actual market demand for 3G products in general and TI semiconductor products specifically, and actual certification test results relating to TI products. TI disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this white paper. Technology for Innovators, the black/red banner, DRP, OMAP-Vox, TMS320C54x and M-Shield are trademarks of Texas Instruments. The Bluetooth word mark and logos are owned by the Bluetooth SIG, Inc., and any use of such marks by Texas Instruments is under license. All other trademarks are the property of their respective owners. A Texas Instruments Incorporated Printed in the U.S.A. SWPY019

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