Sequans Leads with Broad WiMAX Portfolio Performance Advantages

Introduction – Why Sequans?

Sequans is one of the leaders in the WiMAX semiconductor business. We suspect
this is due to their broad product line-up, excellent IC performance, and a very
pragmatic market focus. Unlike some WiMAX chip companies that only focus on a
particular class of end product (e.g. Intel on notebooks, netbooks, and MIDs),
Sequans has components that can be used for any type of WiMAX equipment, gadget
or device. They are selling chips for both fixed and mobile WiMAX, base stations
as well as subscriber units, VoIP CPE, USB dongles, smart phones, and other
devices. Indeed, the company seems to have the broadest range of WiMAX
components among all the WiMAX chip companies.

Component performance features are quite impressive. They include excellent
receiver sensitivity (which can increase link budget and/or result in lower bit
error rates), up-link as well as down-link MIMO (with 2 transmitters and 2
receivers per base band component), low power consumption (crucial for mobile
device battery life), and very high throughput per channel (for your video
apps). Many of these features can be used on a stand-alone basis, but others
(e.g. up-link MIMO) can be more effectively exploited by using Sequans
components at both ends of a WiMAX radio link, i.e. in the Base Station and
Subscriber Unit. The company is now targeting pico-base stations as a
significant growth opportunity (more on this later in the article).

Multi-country design, development and testing make a very interesting Sequans
story. The company has engineering operations in France, UK, Israel, and the
Ukraine. [There's also a business development and sales office in Cupertino, CA
where this interview took place.] Proper chip partitioning, task assignments and
co-ordination of a complex chip design are quite an accomplishment, in this
author’s opinion (he is a former datacom chip architect). IP video conferencing
is effectively used on a regular basis for design review meetings and other
co-operative engineering efforts. Based on their track record of getting product
to market, this design and development methodology works quite well. It could be
a model for other high tech start-ups.

Company History

In September 2003, seven former co-workers founded Sequans Communications. They
had previously all worked together in Paris, designing custom silicon for cable
modem termination systems at Pacific Broadband Communications- a company that
had been sold to Juniper Networks in 2001. The initial business plan was
focusing on fixed WiMAX, which at the time was being standardized by IEEE
802.16d and was the main focus of the WiMAX Forum.

The co-founders believed there were sufficient similarities between the DOCSIS
and WiMAX (IEEE 802.16d) MAC sub-layers to give them a head start. Sequans
founder and CEO Georges Karam identified the following common MAC functions:
control scheduling, uplink ranging channel, Uplink and Downlink channel maps,
bandwidth requests, grants and scheduling. The OFDM based WiMAX PHY was a
technology that the team was also familiar with from past design experiences.
CEO Georges Karam and Chief Scientist Hikmet Sari were early pioneers in OFDMA
technology for CATV networks . The Sequans engineers had also acquired analog
and RF design expertise, which proved to be invaluable in the design of the RF
front-end component of a WiMAX chip set.

Having raised 1.5M Euros in June of 2004- deemed to be sufficient start-up
capital-the co-founders hired a core group of engineers that had worked at
Pacific Broadband. The new company started designing Fixed WiMAX base station
and subscriber station chips in the second quarter of 2004. Later that year, the
802.16d-2004 standard was finalized. By October 2004, Sequans had completed the
design of an FPGA based fixed WiMAX solution that was used by equipment maker
Airspan. In September 2005, samples of the SQN2010 base station and SQN1010
subscriber station components became available.

About the same time that the Fixed WiMAX standard was finalized, Intel, KT, and
the WiMAX Forum started a campaign to accelerate standardization of OFDMA based
IEEE 802.16e "Mobile WiMAX," which could be used for either fixed or mobile
WiMAX deployments. Sequans responded to that challenge by designing the SQN1110
- Wave 1 mobile station chip (see chip scorecard chart below). This component
was available in summer of 2006. It was followed by the SQN1130 and SQN2130:
Wave 2 base station and mobile station chips for 802.16e-2005, which came to
market in March 2007 and July 2007, respectively. The SQN1130 is embedded in the
HTC smart phone being sold by Scartel in Russia (see photo).

The SQN1210 multi-frequency combo chip is the latest Sequans component. It’s an
integrated 802.16e baseband and RF chip, which promises to lower costs of
handheld WiMAX devices, such as smart phones and MIDs. We expect it will be used
in many low cost WiMAX devices.

So in less than five years of actual operations, Sequans has designed nine
different WiMAX components and got each of them working properly. That short
time from conception/design -to-market is quite impressive. But what’s even more
amazing is that all of the commercially available Sequans components worked on
the first silicon spin- a very rare feat indeed!

Fixed/Nomadic WiMAX now, Mobile WiMAX soon?

To date, Sequans is only producing WiMAX components. They hope to solidify their
strong revenue position in fixed and nomadic WiMAX while waiting and hoping that
(truly) mobile WiMAX becomes a commercial success. Fixed/nomadic WiMAX customers
include Huawei, ZTE, Alcatel, and other companies.

Editors note: We are all waiting to see real mobile WiMAX results (e.g.
deployments, subscriber growth and revenues) from Clearwire in the U.S., UQ
Communications in Japan, KT’s WiBro in Korea, Scartel in Russia, Taiwan’s WiMAX
Year One, Packet 1 in Malaysia, etc).

Sequans components are currently being used in equipment that has been deployed
in several WiMAX networks. Those include Clearwire Xohm (formerly SPRINT) in
Baltimore, MD (with Zyxel CPE), Scartel in Russia (HTC smart phone), Packet One
in Malaysia (Gemtek CPE), Reliance in India (Telsima 802.16d Base Station and
CPE), and Mobilink in Pakistan (Gigaset CPE). Here are some specific uses for
the Sequans IC’s:

• The SQN1130 chip is used in Fixed WiMAX CPE including: out door modems (ODU),
  desktop modems, VoIP modems, gateways (WiMAX + VoIP + WiFi combo)
• The SQN1130 & SQN1170 are used in USB dongles and in Embedded modules:
  mini-cards, half mini-cards, and dedicated modules (a bare die version of
  SQN1130).
• The HTC smart phone deployed in Russia uses the SQN1130.
• We expect future WiMAX smart phones and hand held gadgets to use the recently
  introduced SQN1210.

The Sequans Competitive Advantage: low cost and diversification

Mr. Karam claims Sequans’ silicon produces the lowest cost CPE for fixed/
nomadic WiMAX. He cited a WiMAX CPE box with both high-speed Internet access and
VoIP with a target cost of between $60 and $100. Those two services are being
offered by almost all of the WiMAX operates providing service to homes and small
businesses. Another example is a USB dongle (external WiMAX modem), which a
network operator often pays less then $60 for. Georges believes that CPE vendors
are using "forward pricing" to lower their prices in anticipation of greatly
increased demand from more subscribers. One key factor contributing to low WiMAX
CPE costs is the absence of IPR issues, like the royalties and licensing fees
imposed by Qualcomm, Ericsson and others for their 3G patents (a subject this
author researched for Nokia).

Diversification for Sequans currently comes from being in all types of WiMAX
markets:

• Base Station and CPE end-to-end silicon solution (see illustration below)
• 802.16d and 802.16e silicon now, 802.16m (4G version of WiMAX standard) later
  if mobile WiMAX is commercially successful

We think it’s significant that Sequans is the only chipmaker to have its
components certified for both base stations and subscriber stations for both
fixed and Mobile WiMAX. [The term "WiMAX Forum Certified?" is a trademark of the
WiMAX Forum].

New Growth Opportunities: WiMAX and LTE

Pico base stations are seen as a near term WiMAX growth opportunity for
Sequans. The larger macro base stations are much more expensive, but not nearly
as cost effective. Macro base stations support multiple sectors to realize a
large cell size (signal coverage) and to penetrate buildings for indoor use.
Pico base stations are much smaller, with much lower power consumption. While
supporting a smaller cell size with 300m to 700m range radios, more of them will
be required for a given geographical area. Up till now, smaller base stations
needed ASICs or custom VLSIs to be competitive. But Sequans hopes to change that
with lower cost standard components. Mr. Karam says that UQ and Clearwire are
currently evaluating pico base stations, which are becoming "a very strong
industry trend." The SQN2130 is being designed into pico base stations. Work has
just started on Femto Base Stations, with customers initially using the SQN2130.
Some of the Sequans customers in this space are Alvarion, ZTE and Harris-Stratex.

The company is also involved in unlicensed WiMAX – mostly a proprietary market
in Eastern Europe at 5.8GHz frequency- with Alvarion and Motorola counted as
customers. In anticipation of the US broadband stimulus funding, the company is
also investigating 3.65GHz "lightly licensed" WiMAX as an opportunity (as are
many small, independent network operators).

Beyond mobile WiMAX, Sequans sees LTE as a growth opportunity- not as a backup
plan. Due to use of OFDMA, the LTE PHY layer is similar to 802.16e-2005. Hence,
those OFDMA design aspects are being carried forward in LTE components currently
in design and expected to be available sometime in 2010. Issues for the LTE chip
design include: LTE market development (not just hype), time to market, power
consumption, and die size. An optimized LTE chip is being developed, rather than
a combo LTE/WiMAX chip as some other semiconductor vendors have alluded to.

Source: The information in this article was obtained in a "no holds barred"
interview with CEO Georges Karam and in discussions with PLM Director Ambroise
Popper, who recently participated in an IEEE ComSoc SCV 4G panel session

Part II of this article will examine Sequans strategic view of 4G mobile
networks (LTE and 802.16e evolving to 802.16m). We will also include views and
opinions of other semiconductor companies that participated in the May 13th
ComSoc-SCV panel session, moderated by this author.