RF Front-End Chips: Key Components and Applications
RF front-end chips include various electronic components such as power amplifiers (PA), filters, duplexers or multiplexers, low-noise amplifiers (LNA), switches, antenna tuning modules (ASM), and more.

With the rapid development of communication technologies like 5G, the demand for RF front-end components has surged. According to forecasts, 5G smartphones will support at least 50 additional frequency bands beyond the nearly 40 bands supported by 4G, resulting in a total of over 91 frequency bands across 2G/3G/4G/5G networks. This increase in frequency bands will correspond to a rise in the number of RF components used in smartphones.

According to Yole data, the global RF front-end market will grow from $15.2 billion in 2019 to $25.398 billion in 2025, with a compound annual growth rate (CAGR) of 11% from 2020 to 2025.

Driven by rapid industry growth, a large number of domestic startups have emerged. Currently, there are more than 100 RF companies in China, with over 10 or even 20 companies in each RF chip segment, and more startups entering the market.

Capital Attraction in the RF Chip Industry
The rapid expansion of the market has attracted keen investors. According to Gao Chao, Managing Partner and CEO of Yunxiu Capital, “In 2020, it is hard to find a fund that does not invest in semiconductors.” Around 20 institutions were long-term investors in semiconductor projects, but in the past year, over 1,000 investment institutions, including industrial funds, financial investors, and state-owned entities, began looking at semiconductors. Initially, these institutions explored various sectors, but gradually they realized that mobile phones, wearables, and the Internet of Things (IoT) had relatively low entry barriers, short product cycles, and large downstream markets. As a result, mobile RF, power management, and TWS (True Wireless Stereo) chips have gained significant attention. While the prices of RF chips have decreased, investments in RF chip ventures have risen by 20%-30%.

With the support of capital, excellent domestic companies such as Zosun Microelectronics, Weijie Chuangxin, Unisoc, Angry Microelectronics, Huizhiwei, Feixiang Technology, Haoda Electronics, Deqing Huaying, and Kaiyuan Communication have emerged, contributing to various segments of the domestic RF front-end market.

Global and Domestic Market Landscape
In the global RF chip market, Skyworks, Broadcom, Qorvo, Qualcomm, and Japanese companies like Murata dominate the top positions. Meanwhile, domestic manufacturers mainly produce low-end discrete components, holding only a small portion of the market share.

The initial hope was that domestic RF chips could compete with international giants. However, before any company could challenge the major players, intense competition within the domestic RF industry had already begun.

Declining Profit Margins in the RF Chip Industry
In 2021, the chip shortage that boosted performance in the first half of the year led to excessive ordering and inventory accumulation, resulting in high stock levels for smartphone manufacturers. To push sales and capture market share, competitors lowered prices, squeezing profit margins in the RF chip sector. As a result, the gross margins of many domestic RF chip companies have fallen.

Currently, aside from industry leaders like Zosun Microelectronics, which boasts a gross margin of over 50%, other companies have lower gross margins, with very few reaching above 30%.

In the first half of 2022, Zosun Microelectronics, Weijie Chuangxin, and Maijie Technology had gross margins of 52.55%, 30.49%, and 18.08%, respectively. Zosun’s main business, including discrete components and RF modules, saw gross margins of 53.51% and 51.21%. Weijie Chuangxin’s major products are PA modules and receiver modules, while Maijie Technology’s focus is on electronic components and LCM modules, with lower margins of 22.06% and 13.57%.

Some companies, like Feixiang Technology, have adopted a low-price strategy, maintaining gross margins of less than 5% for three consecutive years. From 2019 to 2022, their gross margins were 4.99%, 2.74%, 3.19%, and 12.95%, respectively. In the 4G PA and module sectors, their margin was even below 1% after 2020.

The Three-Year Challenge for Domestic RF Chips
Recently, Zhong Lin, founder of domestic WiFi FEM RF manufacturer Sanwu Microelectronics, issued a warning about the current state of domestic RF chips. According to Zhong, the RF front-end chip market in China is now experiencing chaotic competition. The price war is brutal, with prices for mobile 4G PAs dropping to $0.4, and the price for Cat.1 PAs reaching as low as $0.18–$0.16. As a result, the market for domestic Cat.1 PAs will shrink to approximately ¥150 million, and six domestic RF chip companies are competing in this space, with more entering the market.

The WiFi6 FEM market is also undergoing a fierce price battle, with 5.8G WiFi6 FEM prices falling below $0.17 and WiFi5 FEM dropping below $0.15. In the ¥3 billion domestic WiFi FEM market, nearly 30 manufacturers are competing.

Current State of Domestic RF Chips
China’s RF front-end chip manufacturers mainly produce low-value, single discrete components or low-integration modules. Among the RF front-end components, the domestic production rates are highest for RF switches, low-noise amplifiers (LNA), power amplifiers (PA), SAW filters, and BAW filters.

RF Switches and LNAs: These have higher domestic production rates. Many manufacturers in China, such as Zosun Microelectronics, Unisoc, and Feixiang Technology, produce these components. However, only a few companies, like Zosun and Weir Electronics, focus primarily on switches and LNAs.

Power Amplifiers (PA): There are numerous domestic manufacturers producing 2G/3G/4G PAs, including Weijie Chuangxin, Feixiang Technology, and Unisoc. However, competition is fierce, and profitability is generally low. Recently, domestic companies have been moving towards higher-value 5G PA modules, with companies like Zosun Microelectronics and Weijie Chuangxin leading the way.

SAW Filters: The domestic SAW filter market is dominated by companies like Zosun, Deqing Huaying, and Maijie Technology, but their technical gap with international players remains significant.

BAW Filters: With a complex manufacturing process and patents controlled by international giants like Broadcom and Qorvo, BAW filters are a high-barrier market. Chinese companies currently have a negligible share in the BAW filter sector.

The Fork in the Road for Chinese RF Chip Companies
For Chinese RF chip companies, the path forward is divided into two choices: one is to collaborate and merge with other companies, abandoning competition in the low-end market, and the other is for capable companies to focus on high-end RF chips, aiming to challenge the global leaders by accumulating expertise and developing breakthroughs.