If Broadcom‘s unsolicited $103 billion bid for Qualcomm succeeds, it could set up a battle with Intel for dominance in the production of the next generation of communications chips, which will play a vital role in so-called connected cars.

Vehicles of every sort already are starting to add wireless chips to download everything from maps to entertainment, and in a few years nearly every new car may be connected. Self-driving cars, still in test mode, will accelerate the move.

“The amount of chips per car is going to grow dramatically,” said Egil Juliussen, a principal analyst for automotive technology at IHSMarkit.

Chip makers are scrambling to create new mobile networks, the so-called fifth generation, which will link phones as well as cars, drones and even industrial devices such as smart street lights, which count pedestrians and send data to city planners.

Qualcomm long was the dominant communications chip maker for mobile phones, although computer chip maker Intel has begun muscling into the space. Each now supplies about half Apple‘s iPhone communications chips, for instance.

Now they are jockeying in a mature market to design so-called 5G networks that will be up to 10 times as fast as wireless networks today, which are expected to start rolling out in 2020. Research firm IDC predicts 1.53 billion smart phones will be shipped in 2017 expanding to only 1.77 billion units in 2021.

The market for modem chips for cars, by contrast, is expected to grow sharply. Tristan Gerra, a senior semiconductor analyst for Robert W. Baird & Co, said that this year, only about 12 million of the 90 million cars manufactured per year have internet connectivity. But connectivity will become ubiquitous on self-driving cars.

“You basically (will) have 80 million units per year that are going to get a modem,” he said.

Intel and Qualcomm declined to comment.

Qualcomm itself is trying to buy NXP Semiconductors, a maker of automotive chips from so-called “infotainment” system chips to camera systems, for $38 billion. It is unclear whether that deal will go through and whether Broadcom would take on NXP, but Broadcom has said it is willing to do so.

A tie-up between the three companies could create a formidable competitor in the automotive chip space, said IHSMarkit’s Juliussen. He views Intel and Nvidia, which make both make the main processors used in self-driving vehicles, as leaders in the young market, but a combined Broadcom-Qualcomm-NXP would be a strong third-place.

Intel has bought itself into relationships with autonomous car developers thanks to its acquisition of vision system maker Mobileye. Broadcom would get something similar with NXP, Juliussen said.

If Broadcom pulls off both deals, its market position in some areas could be dominant, said Cowen and Co analyst Karl Ackerman.

“[Broadcom] would basically own the majority of the high-end components in the smart phone market and they would have a very significant influence on 5G standards, which are paramount as you think about autonomous vehicles” and connected factories, he said.

Source: Tech CNBC
A Broadcom-Qualcomm deal could challenge Intel on connected cars