UK-based femtocell maker Picochip has been snapped up by Mindspeed Technologies, a supplier of  semiconductor solutions for network infrastructure applications, for approximately $51.8 million (£33.5m) in cash and shares, and up to $25 million earn-out payments in early 2013.

A statement from the companies claims that the merger will create a “clear market leader in small cell base station solutions,” and that together the companies will deliver “the most comprehensive portfolio of base station semiconductor solutions on the market, from residential to enterprise to pico/metro applications”.

Raouf Y. Halim, chief executive of Mindspeed, said that Mindspeed and Picochip intend to join their respective 3G and 4G technologies to offer multi-mode, ARM-based, system-on-chip (SoC) products. The two companies also aim to lead the industry’s move toward fixed/mobile broadband convergence – a trend which Halim believes will drive revenue and earnings growth for Mindspeed in the future.

Picochip currently provides around 70 percent of the chips used to make femtocells, but has had difficulty converting its success in 3G/HSPA into LTE growth. According to Picochip chief executive and president Nigel Toon, Mindspeed's Transcede LTE product family offers the intellectual property scale and expertise to enable the company to deliver these solutions.

Research firm Mobile Experts LLC predicts small cell base station shipments will grow to 24 million units by 2016, creating a market for alternative cells that could exceed the macrocell market in terms of transceiver unit shipments during the next four years.

Small cell base stations (or femtocells) are used to beef up 3G network strength, primarily inside buildings, using fibre broadband for the uplink to the Internet. They will also soon be able to improve home security, personal safety and help integrate smartphones with TVs, laptops and media players, according to ABI Research.

Femtocells have been touted as a way to solve the problem of 3G ‘not-spots’, as well as easing strain on mobile networks during London's Olympic Games. According to Picochip CTO Dr Doug Pulley, London needs to install 70,000 small cells across the capital, and a further 2,000 nodes to cover the Underground network, in order to offer a decent 4G LTE mobile broadband service by 2015.

The acquisition has been approved by Mindspeed’s and Picochip’s boards of directors and is subject to certain closing conditions, but is expected to close in the first calendar quarter of 2012. The total addressable market for the combined entity is predicted to grow to $3 billion (£1.9bn) by 2016.