Crowded mobile chip market likely to shrink further

This means Broadcom, which had a 1.4 percent market share in 2006, and STMicro, with an almost 6 percent share, have a lot to do before reaching Wu's estimated range, let alone catching up with TI and Qualcomm.

"They've (gotten) over the biggest hurdle, to have a tier one company to sign up for them ... Their biggest challenge is executing," said Sideco, adding that the new challengers would likely compete on customer service and pricing.

NEED FOR CONSOLIDATION

But now that they are going to be pitted more directly against the biggest players, it would also make sense for Broadcom and STMicro to buy smaller rivals that have strong technology but are too small a market presence to go it alone.

"There'll be either people dropping out or selling," in the "overcrowded market" Sideco said. As a result, for Broadcom and STMicro, "it's probably a good idea for them to look at smaller companies that might have some niche technologies."

The specter of consolidation or failure could also be a self-fulfilling prophesy as handset makers need to worry about betting on suppliers that are in danger of pulling out of the market or finding a buyer that wants to exit wireless.

"That's a big concern," said Sideco, who stopped short of predicting what the next acquisition targets could be.

Recent chip deals include private equity investments in Freescale and NXP, the chip unit of Philips.

Marvell, which bought the mobile chip unit of Intel Corp., ranked tenth with a 2 percent market share in the first quarter of this year, according to iSuppli.

But several analysts named Marvell as a competitor to be reckoned with as it supplies chips for the popular Blackberry wireless email devices from Research In Motion.