Radio Frequency (RF) front end in a mobile handset is an essential module that allows the connectivity of a device to a mobile network. The RF front end module sits in between the antenna and transceiver and performs the essential function of connectivity to the network, reducing noise to signal ratio and the conversion of analog to digital. It consists of multiple components, including Power Amplifiers (PA), Low Noise Amplifiers (LNR), Switches, Duplexers, filters and other passive components. Adoption of newer and advanced connectivity standards drives the need for advanced and a greater number of components within the RF front end modules. The graphic below shows the evolution of RF front end dollar content in a high-end smartphone over the last three generations (with the increase in number of components of each generation indicated below, Exhibit 1):
Exhibit 1: The evolution of RF front end content in a high-end smartphone over the last three generations
Source: Gartner
The complexity of RF front end modules in a 5G smartphone, as shown above, has resulted in a substantial increase in dollar amount of RF content in 5G smartphones compared to 4G. Teardowns of 5G smartphones in the marketplace indicate material RF dollar content increases compared to similar priced high end 4G smartphones (Exhibit 2):
Exhibit 2: Radio Frequency Front End (RFFE) Cost Comparison for Leading High-End Smartphones (5G vs. 4G LTE)
Source: Wells Fargo Securities
The combination of an increased mix of 5G smartphones among overall smartphones sold every year and the increased dollar content in 5G smartphones is expected to increase the Total Addressable Market (TAM) for RF front end modules over the next 4-5 years, as shown in the table below (Exhibit 3):
Exhibit 3: Total Addressable Market (TAM) projection for RF Front End modules through 2023
Source: Wells Fargo Securities, Gartner, IDC
Leading smartphone manufacturers have aggressive plans of rolling out new 5G smartphones from the second half of 2020, carrying on to 2021 and beyond, that would result in great growth opportunities for RF front end manufacturers. We are actively looking at investment opportunities in companies that have unique leadership position and are set to benefit from the growth in RF content in 5G Smartphones.
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