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Israeli Startup's Formula for Breaking Into Mobile: Forget the IPhone

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An Israeli startup thinks it can do a better job than Intel, Broadcom and other chipmakers hundreds of times its size at loosening Qualcomm's stranglehold over wireless-data chips. Because Altair Semiconductor isn't obsessed with securing a deal for Apple's iPhone or another mobile giant's flagship smartphone, it just might have a shot.

The company, based outside Tel Aviv, sells chips that only work on the latest mobile-data networks using technology called 4G long-term evolution (LTE). By just targeting the high-end networks, Altair avoids the expenses of designing complex chips that must operate on all of the other existing cellular standards and paying patent royalties to competitors such as Qualcomm. And that allows Altair to sell its chips at a lower price.

Investors have bought into the idea. Bessemer Venture Partners, which has invested in LinkedIn and Skype, and other venture capitalists have poured more than $100 million into Altair. The chipmaker announced today that it raised an additional $25 million from investors.

As more smartphones, tablets and even some laptops incorporate 4G chips into their products to enable Internet access from just about anywhere, the market has exploded. Qualcomm made 86 percent of the LTE chips shipped last year, according to researcher Forward Concepts. Intel, Broadcom and Nvidia are among a list of companies planning to enter the market this year.

The giants are all vying to get their chips into the industry-leading iPhone and Samsung Electronics's Galaxy products. And with good reason: The number of smartphone users is expected to reach a billion next year, according to Morgan Stanley. Those phones all use multi-mode chips that can downgrade to 3G and older networks so that users can still make calls and access the Web when 4G LTE service isn't available.

Altair will settle for not being in the iPhone. For a startup, tablets and other devices that only need high-speed data is enough, Altair co-founder Eran Eshed said in an interview.

"We're not going to touch 3G," he said. "All of those guys are playing catch up with Qualcomm. We're maniacally focused on LTE only."

Altair, which was founded in 2005, makes chips are already shipping in some devices in Russia, and Verizon Wireless has certified a modem using the startup's technology to access its U.S. network. Eshed said tablets and computers that incorporate Altair chips are coming to market later this year, though he declined to name the startup's customers. Next year, consumer-electronics companies could sell 30 to 40 million units of the type of LTE-data products Eshed's company specializes in, he said.

The Hod Hasharon, Israel-based company, which has about 150 employees, probably has a couple years before the market its going after becomes big enough to attract the attention of Qualcomm and other semiconductor companies. In the meantime, Altair is racing to produce its LTE chips as cheaply as possible, and sign on as many electronics makers as it can. The startup is hoping that the head start can buy itself enough time to chip away at Qualcomm's massive lead.

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