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Analysis: Sirius-XM merger is good for IC industry

Posted: 31 Mar 2008 ?? ?Print Version ?Bookmark and Share

Keywords:chip sales? IC industry? Sirius-XM merger?

The U.S. Justice Department's approval of the planned Sirius-XM Radio merger is good news for semiconductor suppliers, according to industry watchers. With only the U.S. Federal Communications Commission (FCC) yet to green-light the union, the merger will mean a boost in chip sales as radio suppliers scramble to make their receivers compatible with both satellite systems.

"The choice will be gone for the companies that have been providing the technology behind those radios," said Rick Sizemore, chief strategy and business development officer for MultiMedia Intelligence, "so now, instead of customers ordering 1 million components, they'll be ordering 2 million."

The Justice Department's approval could also spike demand for satellite radios now that consumers have reason to hope the merger will go through. Prospective customers have been sitting on the fence until now, reluctant to be caught in the same boat as HD DVD owners, who backed the wrong horse.

A turnaround in demand could trigger a supply-and-demand mismatch, allowing chipmakers to adjust prices upward. "Fabs have to be managed correctly," Sizemore said. "If demand starts to spike, no one is going to have all these radios sitting on shelves, so that demand means higher prices for the semiconductor industry."

But, at the same time, the slumping economy and weak retail numbers could keep satellite radio sales down. Satellite radio, with its pricey monthly subscription fee, is seen as a luxury in lean times. It's hard to sell pay radio when the only price of listening to AM and FM is enduring the ads.

ST boost
STMicroelectronics should fare well if the merger is approved. The company is the sole provider of XM's baseband chipset and one of a pair of suppliers of Sirius baseband chipsets. ST also delivers tuners for both systems and expects to continue supplying hardware companies with the same components when radios have to receive signals from both services' existing satellites.

If the new Sirius decides to integrate the baseband and tuner on a single chip, ST will be in the enviable position of being able to do so with a minimal learning curve, according to Michael Kasparian, market development manager for the automotive business unit at ST. However, he said, a redesign into a single baseband chip will require retooling, because the two basebands are currently worlds apart. That kind of overhaul, however, is typical in the dynamic consumer electronics product cycle, although getting the new chip spec from Sirius could take up to a year after FCC approval. "We'd be talking about a 65nm CMOS process for the baseband chip," he said. "If it takes longer to get the design, we may be to 45nm."

ST and other chip suppliers can only speculate at this point about the nature of chip requirements for a combined satellite radio system. Those decisions will be made by Sirius after the merger goes through.

Ripple effect
A unified company could bring in economies of scale large enough to affect the entire industry. Chip real estate alone delivers cost savings. "You're buying by die size," Kasparian said. "The more you buy, the cheaper per die you can get away with, whether it's what we're charging or what you're willing to pay."

The market currently supports two distinct systems with distinct chipsets, but a single-chip solution serving both types of satellite would offer cost advantages. "That would mean fewer part numbers shipping to larger volumes," Kasparian said. "That's always cheaper to do, and that kind of cost reduction would be passed on to the consumer."

- Rebecca Day
EE Times

Rebecca Day is a freelance journalist based in New York.

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