According to iSuppli, both mobile handsets and their semiconductor components are going through a period of consolidation that may lead to a significant winnowing of baseband chip suppliers. In wireless handsets, numerous smaller players headquartered in China have exited the business during the past few years. This, coupled with the bankruptcy of BenQ-Siemens, has led to an increasing concentration of market share among the Top-5 mobile-handset OEMs. In 2006, the Top-5 OEMs accounted for 83% of global mobile-handset unit shipments, up from 75.6%. This has led to declining opportunities for mobile-handset baseband semiconductor suppliers.

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"Quite a few baseband semiconductor suppliers are now battling for sockets at a dwindling number of handset OEMs," said Derek Lidow, president and chief executive officer of iSuppli. "With a smaller number of handset OEMs accounting for an overwhelming portion of sales, opportunities for baseband IC suppliers are getting more difficult to come by."

Meanwhile, the overall mobile-handset market is experiencing decelerating growth. After rising by 20.1% in 2006, growth in worldwide mobile-handset unit shipments is expected to slow to 13.1% in 2007, and then to 11.6% in 2008, according to iSuppli. The annual growth rate will continue to decelerate during the following years as the mobile-handset market becomes more mature due to high penetration rates in the world's developed regions.

This, combined with a slowdown in handset shipment growth, has led to a deceleration in the growth of the mobile-handset baseband IC market. After rising by 14.1% in 2006, global revenue growth will slow to low single-digit percentages in 2007.