Officially opened in September 2020, when 5G was still exciting, the ECHO Fab in Chandler, Arizona, was described by NXP as the “most advanced” facility of its kind. Older fabs had churned out power amplifier (PA) chips for the world’s 4G networks. Using a silicon-based technology called laterally diffused metal-oxide-semiconductor (LDMOS), NXP’s PAs were ubiquitous in the earlier mobile generation. The ECHO Fab’s job was to manufacture PAs for 5G equipment based on gallium nitride (GaN), a semiconductor material seen by NXP as a new “gold standard” in power density and efficiency. Yet just five years since that opening ceremony, ECHO is to fade away.
It marks an exit from 5G and the radio power (RP) market by the Dutch company and leaves kit vendors like Ericsson and Nokia with fewer options for a critical component. News of the ECHO Fab’s pending closure was first reported in a LinkedIn post by Earl Lum, the founder of analyst company EJL Wireless Research, who appears to have learned about it from undisclosed sources. But it was subsequently confirmed by NXP in a statement blaming that decision on the poor 5G outlook.
“5G rollout declined in recent years due to a lack of return on investment for mobile operators and global 5G basestation deployments have been well below original estimates,” said the company in an email sent to Light Reading. “Given the market realities with no outlook for recovery, the RP business no longer fits into the company’s long-term strategic direction. Therefore, NXP has made the decision to ramp down its Radio Power product line.”
The rise of Sumitomo
The company’s expectation is that the ECHO Fab will produce its last GaN wafer in the first quarter of 2027. Employees have already been notified of the move, it said. In the meantime, NXP insists that it will continue to produce GaN products throughout what it calls a “transitional period” for customers. It has also emphasized that the Chandler fabrication facility producing other types of semiconductors will continue to exist. “Decisions regarding NXP’s RP product line and ECHO Fab are independent of the rest of the Chandler site,” said NXP.
The company’s assessment of the current market is especially gloomy but follows two years of shrinking 5G product sales, as monitored by analysts at Omdia, a Light Reading sister company. After annual revenues hit the $45 billion mark in 2022, they dropped by $5 billion the following year and another $5 billion in 2024. That prompted retrenchment by Ericsson and Nokia, which have collectively cut more than 25,000 jobs over this period, at least 13% of the earlier combined total.
The market contraction has visibly hurt NXP, as well. Last year, revenues generated by its “communication infrastructure and other” unit, the third biggest by sales, fell almost a fifth, to less than $1.7 billion. The situation has worsened this year, with revenues for the first nine months down a quarter year-over-year, to $962 million. In a filing with the US Securities and Exchange Commission (SEC), NXP blamed “declines in our processors, secure cards, and RF power products” for the drop.
But Lum reckons NXP also suffered a loss of market share in the 5G era after it failed to respond quickly to various important shifts. Detailed in his LinkedIn post, those include the transition to massive MIMO, an advanced antenna technology; the migration to higher band spectrum for mobile services; and the introduction of GaN as a successor to LDMOS. It has consequently ceded its leadership position in PAs to Japan’s Sumitomo, which now “continues to dominate the market,” said Lum.
Before 5G, NXP had been the dominant force, selling PAs to every major basestation manufacturer, the analyst noted in his post. Its PAs were prominent in the Flexi-branded remote radio units built by Nokia, and NXP even served China’s Huawei. The Chandler site came into NXP’s possession about ten years ago via its $11.8 billion takeover of Freescale, formerly a part of Motorola, which pioneered the development of LDMOS power transistors back in the 1960s, said Lum.
The winddown of the ECHO Fab will evidently claim jobs, with NXP employing about 750 people across the entire Chandler site last year, according to a company update from August 2024. But a much smaller number will be directly involved in PA manufacturing. Worldwide, NXP had a workforce of approximately 33,100 people at the end of last year, according to its most recent annual filing with the SEC.
The current exposure of Ericsson, Nokia and other Western equipment manufacturers to NXP is unclear, but Lum’s update contains a warning. “NXP has or will announce very soon end of life (EOL) for all LDMOS and GaN RF power semiconductor products so anyone reading this article that has an NXP RF device designed into their system should start looking for another replacement part, and quickly,” he wrote. Sumitomo will undoubtedly be happy, but diversity in the 5G supply chain just took another small hit.