Chip designs allow device makers to improve network efficiency and differentiate their wireless connectivity technology from rivals, though such efforts aren't cheap.

Ericsson, the world's second-largest telecom equipment supplier after Huawei Technologies, said it has invested more in chip development over the past six to seven years. Speaking to Nikkei on the sidelines of MWC 2024, Freddie Sodergren, Ericsson's head of technology and strategy for its networks business, admitted that with 5G, in-house chip development is much more important than before.

The company still buys FPGA chips for some products, Mr. Sodergren said. But with 5G connectivity, the need for higher computing power and lower power consumption has become more important, forcing Ericsson to expand its chip development team.

FPGAs are off-the-shelf chips that users can program for specific purposes. They are power hungry and not cheap: An FPGA base station can cost more than $1,000, according to industry sources.

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European telecom equipment companies are looking to keep up with 5G and AI user demand by developing their own chips. Photo: Nikkei

Ericsson Silicon, the unit responsible for application-specific integrated circuits (ASICs), has set up a facility in Austin, Texas, and expanded its team in Sweden. It employs several hundred engineers, Sodergren said. With some chips in-house, Ericsson always uses the latest chipmaking node and introduces a new generation of chips every year.

“We are playing a bigger role now than before,” he said. “I think that is one of the reasons Ericsson is really leading the industry… We did this ourselves.”

Ericsson’s Finnish rival Nokia has taken a similar approach, launching its ReefShark SoC family in 2018. As we move from 4G to 5G and now 6G, the ability and understanding of requirements are closely linked to delivering greater performance and lower power consumption, said Jane Rygaard, Nokia’s head of global enterprise partnerships.

“Of course, we can continue to go out and buy chips, but if we want performance and stability, that requires in-house design,” Rygaard said. For example, Nokia’s latest MIMO antenna is half the weight of the previous generation, thanks to the new ReefShark chipset, which increases power efficiency and radio performance.

Stephane Teral, founder and principal analyst at Teral Research, said customization is increasingly important as “5G and AI require more computing power” from network infrastructure. However, developing chips for telecom networks requires significant resources and access to advanced manufacturing technology, so companies like Nokia and Samsung are partnering with established developers like Marvell, a market leader in providing chips for telecom and network infrastructure.

Marvell and Nokia joined forces in 2020 to jointly develop multiple generations of ReefShark chipsets for 5G applications. In 2022, they will focus on producing data processors with lower latency, higher performance, and energy efficiency.

Will Chu, senior vice president and head of Marvell's computing and storage division, told Nikkei that the desire to compete is the "number one" factor driving the rise of custom chips. "From 2G, 3G, 4G, 5G to 6G, every time you go up a new ladder, you need better semiconductors," he said.

Another important factor, according to Mr. Chu, is the convergence of 5G and AI, forcing cloud service providers to upgrade their infrastructure. They need new infrastructure to support all the applications. However, based on his observations, only leading companies – including telecom and cloud – have the capacity and resources to develop or co-develop custom chips.

(According to Nikkei)