Has profitability deserted the wireless business? After all it's inevitable that IC-based businesses commoditise. The first to do so were digital watches and electronic calculators. They commoditised quickly, going from units prices of several hundred dollars to single figure dollars in about five years.
PCs, by contrast, had a terrific run, avoiding commoditisation for over 20 years until the remorseless downward pressure on prices and profits set in a few years ago.
Now, it seems, the commoditisation process has set in with wireless.
Those who recognised this early have an advantage. Linear Tech started to de-emphasise its cellphone IC business back in 2006. "We recognized there was no pot of gold at the end of the cellphone rainbow, just red ink," says LTC's founder and executive chairman Bob Swanson.
This year, NXP has got out of wireless ICs, Freescale is trying to get out of wireless ICs, and TI is looking to sell its wireless baseband IC business.
In the handset business, Motorola has announced its intention to get out, and even Nokia had a Q3 in which sales, profits and market-share all fell.
The old rule stays true: doing something new and difficult is the only sure way to make money in high technology.
And there lies the problem for the traditional IC companies. They've cut back on long-term R&D so how are they ever going to get to do something new and difficult?
Just look at the big IC companies, whatever business area they're in, they're fighting for slots against other companies with similar products.
If you're not ahead of the game you're doomed to be a commodity player. The losses of the big companies only go to show that they've settled for being in commodity businesses with all the attendant financial pain which that entails.
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