Breaking Down Samsung’s Purchase of CSR

By Kevin Dennehy

There have not been many earth-shaking acquisitions of companies that have location as a big part of their offerings. However, the recent $310 million acquisition of CSR’s handset connectivity and location business by Samsung merits an additional look. CSR, along with Broadcom and Qualcomm, are looking at the indoor location market as a strong one in the next four years. In other news, the Mobile Resource Management market is seeing 20 percent growth—not a market with consumer excitability, but one that makes money.

The recent $310 million acquisition of CSR’s handset connectivity and location business by Samsung has put a number of competitors on notice. One analyst, Liam Quirke, IMS Research, says that because of GPS’ increasing presence on smartphones, and Samsung now being the largest handset manufacturer, it made sense for Samsung to want to own this part of the supply chain.

“This complements its already large manufacturing operations that supply a number of smartphone components, including its own Exynos branded application processor — in addition to manufacturing the Apple-designed Ax range of SoCs,” he said.

The Samsung-CSR transaction refers only to the mobile business (i.e., handsets and tablets). “Samsung’s GPS strategy here is inevitably focused around such devices. The trend within connectivity, particularly in devices with small form factors such as handsets and tablets, has been one of increasing integration,” Quirke said. “Connectivity has been packaged into a single chip with some IC suppliers also including GPS. An example would be Texas Instrument’s WiLink 8 solution. An alternative is to include GPS on the cellular baseband, a route which Qualcomm decided to take and has since begun to integrate into its application processors — and more recently also including Wi-Fi and Bluetooth.”

A number of restrictions placed upon CSR by Samsung, as part of the transaction, prevent CSR from selling a GPS product combined with an application processor into the mobile field for 10 years, hinting that this is a direction Samsung may take in terms of integration and subsequently removing additional potential competition, Quirke said.

In addition to the $310 million deal, Samsung will invest $34.4 million in return for 4.9 percent stake in the remaining CSR business. The completion of this acquisition is expected to be in the fourth quarter. Quirke said that as well as picking up the benefit of CSR’s patent portfolio, the acquisition also adds the research and development and marketing support for its Bluetooth and GPS technology for handsets.

The deal follows Samsung’s acquisition in June of Nanoradio, a developer of ultra-low power Wireless LAN for chipsets for devices such as smartphones and tablets, Quirke said. It also  provides Samsung with the connectivity technologies with which to make an entrance into the wireless connectivity market.

During former founder Kanwar Chadha’s tenure at SiRF, which merged with CSR in 2009, the company acquired the GPS businesses of Motorola and Conexant as well some smaller companies such as Centrality, Enuvis, Impulsesoft, Kisel, and TrueSpan.

Indoor Location Market Will Be Important to CSR

CSR, along with competitor Broadcom, has become increasingly involved in the indoor location market, with the announcement of its SiRFusion location platform in November. However, Quirke said that the finer details of the transaction between Samsung and CSR indicate that Samsung has only purchased the technology license for GPS, not indoor location. “If correct, this means CSR is free to sell its indoor location technology to other handset OEMs, and in the reverse means that Samsung is not able to do this,” he said.

With that in mind, indoor location is one of the five key growth areas that CSR is targeting, Quirke said.  “Indoor location, and the various applications associated with it, is centred around mobile devices and, as such, is why I feel CSR was eager to hold on to this portion of their mobile business. Indoor location remains a nascent market with much potential, particularly when considering the opportunity to provide highly targeted marketing material in commercial venues such as shopping malls — not to mention the opportunity in the enterprise space,” he said.

IMS predicts in its “Indoor Positioning, Mapping, Technology and Services 2012” study that 110,000 supermarkets, shopping malls, or large retail stores will have indoor maps by 2016, making extensive use of indoor location technology.

CSR has struggled in the mobile space in recent years, while Broadcom and Qualcomm have continued to succeed on the back of their strengths in connectivity combining ICs and cellular baseband chips, respectively, Quirke said.  “Current indoor location solutions offered by the major IC suppliers reside on the GPS chip itself, making use of a number of wireless technologies and MEMS sensors. In light of this, CSR will need to provide a compelling reason for a handset manufacturer to choose its indoor location solution over one from Broadcom or Qualcomm,” he said.  “On a more positive note, early indications suggest that CSR’s solution may be slightly ahead, in terms of providing an accurate working solution — of those from Broadcom and Qualcomm.”

Enterprise Market Strong…

In other industry news, the leading suppliers of GPS fleet management solutions for the local fleet and enterprise markets are continuing to grow at a strong rate, nearly 20 per year, said Clem Driscoll, president of CJ Driscoll Associates.

“FleetMatics, the largest supplier to small fleets, filed an S1 in May and the IPO is expected in the near future. Telogis continues its wave of acquisitions, most recently NavTrak, said Driscoll, who has completed his “2012-2013 Mobile Resource Management Systems Market Study” that profiles 100 MRM suppliers in several markets.

A strong trend in MRM for both local fleets and the trucking sector is monitoring driver behavior, Driscoll said. “Many suppliers monitor speeding, acceleration, deceleration, speed on turns, etc., and generate driver scorecards to identify the best and riskiest drivers,” he said. “This monitoring of driver performance, along with engine idling time and route adherence, also helps fleet operators minimize fuel consumption, which is a major concern these days.”