Qualcomm Brand Shot CES 2014

    Looking beyond the big OEMs, there is one company that has rode the wave of smartphone success like no other. The multinational telecommunications and semiconductor giant Qualcomm has made its fortune on wireless wizardry. Its market cap currently sits at more than $123 billion, which is $4 billion more than Intel is worth. From pioneering CDMA to pushing LTE and dominating the mobile chipset market, there’s certainly been no lack of vision.

    Qualcomm is always looking for the next development. It’s already churning out low-end chipsets and partnering with China Mobile to capitalize on the growing market and the impending LTE boom in China. It holds countless patents that ensure a royalty stream from smartphone manufacturers and network providers. It is also the dominant force in mobile processors right now. The Snapdragon line has found its way into millions of smartphones over the last few years.

    How did Qualcomm climb into such a dominant position? Can the company hold its ground, or even expand, in the face of some serious competition? Let’s take a look at Qualcomm’s history and its prospects.

    Academia to business

    Irwin Jacobs Founder of Qualcomm YoungCredit: ASU

    In 1968 three Jewish academics, Irwin M. Jacobs, Andrew Viterbi and Leonard Kleinrock, all alumni of MIT (amongst other places), founded Linkabit. It was a consulting company that secured government business solving problems for organizations like DARPA, and NASA. Kleinrock left, and would go on to be influential in the development of the Internet, winning the National Medal of Science in 2007. Jacobs and Viterbi would go on to found Qualcomm.

    Quality Communications

    In 1985 Irwin Jacobs gathered Franklin Antonio, Adelia Coffman, Andrew Cohen, Klein Gilhousen, Andrew Viterbi and Harvey White at his home in San Diego and they agreed to start a new company that would focus on Quality Communications, hence the name Qualcomm.

    As Jacobs would later explain in an interview with the Boston Business Journal, “At Qualcomm, we had no business plan. We had no product in mind. We didn’t put much money into it. But we knew wireless. There had to be something interesting there. And within I think the first six months, we came up with various ideas that have kept us basically busy ever since.”

    Qualcomm’s first contract was with the U.S. military working on CDMA (code division multiple access) technology. It wasn’t the exclusive focus. The OmniTRACS satellite-based data communications system was launched by Qualcomm in 1988 to enable trucking companies to track and monitor their fleets in the field. However, it was the 1989 CDMA demonstration to 50 wireless industry leaders that set Qualcomm on its current path.

    CDMA takes off

    Samsung_CDMA_Phone Credit: Wikipedia

    In 1993 Qualcomm was able to demonstrate data services over CDMA, paving the way for better mobile Internet connectivity. The U.S. Telecommunications Industry Association adopted CDMA as a cellular standard and Qualcomm was soon supplying network infrastructure, chipsets, and licensing its technology to partners. In 1999 the International Telecommunications Union would choose CDMA as the primary technology behind 3G (third-generation wireless networks).

    The first CDMA smartphone in the world landed in 1998. It was born from a partnership with Palm and it was called the pdQ. It basically integrated a Palm Pilot with a cell phone. It was bulky and expensive, but Internet-capable mobile phones were taking off.

    The right mix

    Qualcomm is very good at designing, creating and selling integrated chipsets. It also offers software for mobile devices and wireless networks. Extensive research has enabled it to amass a lot of patents, and it has acquired even more, it recently bought a patent portfolio from HP. That twin stream of sales of its own innovative hardware and software coupled with licensing revenue through its patent portfolio puts Qualcomm in a very healthy position.

    In 2000 Qualcomm integrated GPS into its multimedia CDMA chipset and system software. That combined GPS with Internet connectivity and MP3 and Bluetooth functionality. Over the years it has folded in more capabilities, increased the processing power dramatically, and improved power efficiency. That’s why it was the leading mobile chipset provider in the world by 2007.

    Snapdragon and Android

    Qualcomm Snapdragon 1600

    Instead of resting on its laurels Qualcomm announced the Snapdragon platform at the end of 2007. It would set a new benchmark for features, performance, and power consumption.

    Qualcomm also worked with HTC on a chipset to power the first Android smartphone, the T-Mobile G1, which landed in October 2008. The Snapdragon family would serve in BlackBerry, Windows Mobile, and Windows Phone devices, but Android was the platform that would bring real success. Smartphones from all the major manufacturers, including Samsung, Sony, LG, Motorola, HTC, Huawei, ZTE, and many more have relied on Snapdragon systems.

    Qualcomm wants to do more. It would like to supply all the communication components in smartphones. Its RF360 solution is about offering support for as many LTE bands as possible in a small package that doesn’t use much power. It’s a step towards phones that work everywhere in the world.

    Beyond SoC manufacture

    Qualcomm TOQ Mirasol Internet of Things

    It has also been trying to push its low-power color display technology, Mirasol, using the Qualcomm Toq smartwatch, which is really a reference device rather than a serious attempt to conquer the smartwatch market. As current Qualcomm CEO, Steve Mollenkopf, recently told CNET, “Primarily why we did it was to showcase the Mirasol technology as well as wireless charging. … For us, it’s not really a business.”

    Qualcomm wants to inspire other manufacturers to use its technology; it even has a reference design program, QRD, to help put device manufacturers together with component vendors and software developers.

    It has also been talking about the Internet of Everything, building on the Internet of Things by wirelessly connecting billions of devices. Qualcomm is looking to leverage its existing technologies to push beyond mobile into cars, wearables, and home automation.

    Pretenders to the throne

    iphone5c-vs-iphone5s-backs-cement-8-aa

    Much was made of Qualcomm’s supposed surprise that Apple released the 64-bit A7. A comment about it being a “marketing gimmick” was quickly quashed and Qualcomm soon announced its own Snapdragon 410 processor with 64-bit support.

    We took a look Qualcomm’s position and the challengers to its mobile technology dominance recently in Intel vs ARM and the future of mobile technology. Qualcomm is in a commanding position, but there are threats to overcome.

    It has dominated smartphones, but the Kindle Fire HDX and Nexus 7 aside, it hasn’t had as much success with tablets, where NVIDIA and Intel are making gains. Intel wants to break into mobile after a slow start and it also showed off reference designs for wearables at CES 2014, but it might not be the biggest immediate threat.

    Sravan Kundojjala, Senior Analyst at Strategy Analytics explained, “Qualcomm’s baseband revenue share increased to 66 percent in Q3 2013, thanks to its stranglehold on the LTE baseband market. Over the last four years, Qualcomm spent $14 billion on R&D, which helped the company to gain over 95 percent revenue share in the LTE baseband segment. While Qualcomm’s LTE baseband technology and market share leadership are unquestioned, we believe that certain competitors’ products are production-ready and have the potential to take share from Qualcomm in 2014, especially in the mid-to-low tier.”

    MediaTek and Broadcom are making gains through low-end Android handsets, but are expected to make big moves in the LTE space this year. The growing markets in China and India are the new battleground.

    Can Qualcomm crack China?

    China Polit bureau CommunistCredit: ABCNews

    Qualcomm is fighting to get into the Chinese market as the world’s largest carrier, China Mobile, pushes out LTE. “Our business is getting at the forefront of a technology migration that is occurring in China,” Qualcomm CEO, Mollenkopf told Reuters. “For us now, there’s the opening up of the largest carrier there.”

    However, it may run into problems, as it’s currently under investigation by the NDRC. It remains to be seen whether Qualcomm can dominate the same way it has in the U.S. as average phone prices drop. The company still relies on licensing deals for the bulk of its profits and they are declining.

    Qualcomm has remained one step ahead of the competition so far. Can it continue to do so? Only time will tell. Let us know what you think in the comments.

    Comments

    • Guest123

      as chips become more powerful older chips will be “good enough” and Qualcomm will have problems maintaining their price margins and lead. Hopefully competitors can maintain till that time.

      However, the real competition we need to see brought against Qualcomm is for LTE chips, and that’s not happening.

      • Dave Weinstein

        They’ve faced the “good enough” wall several times and they’ve always managed to come up with something new that was critical for the next generation.

    • MasterMuffin

      I just hope that Intel and nVidia get more mobile market share!

      • WestFiasco

        To spur more cutthroat competition or do you just not like snapdragon products?

        • MasterMuffin

          More competition, better products

          • Dave Weinstein

            don’t worry MediaTek is scaring the shit out of them! There’s plenty of competition in the market now.

      • wezi427

        It helps with competition

      • bobthegun

        as long as they’re not making more difficult for consumer and developer. one code should run on all android platform effectively, without having platform-specific issue.

    • ProtoSS

      in one word? Tegra K1

    • RanRu

      Qualcomm Snapdragon: Building an empire named for a flower

    • tocsin

      I didn’t know Qualcomm had a bigger market cap than Intel :0 didn’t even think it was close

    • Groud Frank

      Good read! Personally I’m rooting for nVidia and they seem to be off to a good start with the K1. I’m also keeping my eyes on Intel. There best so far is the Atom z2580 which not the worst but not the best either, or close to it. As for MediaTek, the have found their bread and butter in the low -end market but I refuse to buy products with their SoC in it; had a terrible experience with it. What about Samsung and the Exynos line?

    • iFaitPlay

      “Much was made of Qualcomm’s supposed surprise that Apple released the
      64-bit A7. A comment about it being a “marketing gimmick” was quickly quashed”

      You should write Apple propaganda articles. LOL
      Qualcomm didn’t say 64-bit is gimmick !!!!!
      They meant . putting 64-bit inside iPhone5S is nonsense and just marketing gimmick.
      And that is the TRUTH.
      Of course one day 64-bit will come and it will be useful. But it will not happen on iphone5S.
      Samsung made 64-bit A7 based on their Exinos process and they are much closer to make use of it with hardware and Tizen (or even Android) (or even for iphone 6)

      • ash

        Without implementing 64 bits how would developers develop apps supporting 64 bits

      • http://facebook.com/icecowboy Jim K

        You don’t have to be a fan boy to talk about the “TRUTH.” And the truth (coming from someone who chose a Moto X over the iPhone) is that iOS7 (while the most bug-ridden of any of the releases since the first) takes some small but useful advantage of 64 bitness, and current apps can be written to take a little more.

        But the underlying and sound reason is that the OS and the 5s are more placeholders to pave the way for subsequent gens take much more advantage – and they will be ahead of the Android market in those terms.

        There’s no way that whole fragmented Android hardware/software system – with all its independent companies – and legacy base of Gingerbread users is going to make a complete (or even hybrid 32/64) shift at anywhere near the pace they’ll be able to with their much higher degree of control over software/hardware integration.

        In the meantime, Apple is now doing all future OS development for computers and mobile devices in 64 bit, so an evolutionary shift that will allow the “s” to receive full OS updates for two years and avoid a lot of spaghetti legacy code. .

        64 bitness will change the core functionality of mobile devices over time – and allow apps that have been impossible on mobiles. The effect will be most notable on pro and niche type stuff – for artists, health pros, things like that (and I imagine will greatly effect what games can do, tho’ I never play any, so don’t follow that side much).

        So Android will still rule the broad consumer market, and the devices will be increasingly great, but Apple will leverage their 64 bit move to protect a number of their niche markets and sell the sizzle of it in their ads to bring in those with more money to spend than any real value they’ll personally realize from spending it…..

      • Dave Weinstein

        The marketing VP that made those comments lost his job over it! Certainly, regardless of whether Apple uses the 64-bit features or not, you shouldn’t shoot your mouth off deriding a technology that your company is about to launch in less than 90 days!

    • Arturo Raygoza

      “For us, it’s not really a business” lmao do wearable fans need more than that?

    • Adam Outler

      How about if we stop giving Qualcomm publicity? They’re also the pioneers of Android bootloader locking and the reason it’s become popular with carriers. They are the number 1 choice of carriers for all devices. Really, lets not promote their ways.

      • Dave Weinstein

        Remember the history. The carriers have historically been their customers, not us. Before there were smartphones, ALL feature phones were commissioned directly by the carriers and they decided upon what was in the phone. Verizon, in their infinite wisdom, decided that ALL feature phones would have a 1-9 menu based UI, regardless of hardware capabilities, in an attempt to shave a few pennies off of tech support calls.

        Qualcomm TRICKED the US carriers into offering data by telling them that data service was an inseparable part of the CDMA RevA update. Both Sprint and Verizon wanted the update because it doubled voice capacity and initial asked Qualcomm to REMOVE the data services! But once the carriers got the “free” data, they started selling it, and against their own internal insistence, found that it was a huge boost to ARPU.

        Qualcomm isn’t the devil, but they’re not mother Teresa eitehr. But as companies go they’ve done more good than harm.

    • M3D1T8R

      Good article. I first bought QCOM (stock) in early 1999, for a split adjusted price of around $3.50/ share. Watched it go up around 3000% in a few months. By January 1, 2000 (the peak), I was up a cool $100,000 off my measly couple thousand dollar investment. If only I’d cashed out that day. Then came the crash of 2000 when I and lots of others lost everything due to being over leveraged and getting margin calls (at the time leverage if 700% was possible and common, now it’s fortunately somewhat more controlled). It was my own microscopic version of what happened in the ’08 financial market crash.

      Moral of the story: Don’t buy on margin.

      Today as an Android user with Qualcomm chips in many of my devices, and as a part time stock investor /trader, I still enjoy following QCOM, occasionally still buying and selling it, occasionally still reminiscing on that crazy morning of January 1, 2000, when, however briefly, as a 20 year old kid, I was on top of the world.

    • apianist16

      If Qualcomm is bigger than Intel, how come they are still stuck on 28nm technology?

      • unknown

        Maybe Intel’s engineers are better than Qualcomm’s engineers…

      • renz

        First of all Qualcomm doesn’t have their own fab like Intel. They contract companies like TSMC/Glofo to manufacture their chip. So it depends on what these semiconductor company have to offer to them. It has nothing to do if they are bigger than Intel or not. If for example TSMC current best process node is 28nm then they will stuck with it (TSMC’s 20nm for SoC just roll out in January this year). Second when it comes to fab tech Intel is the best. While other semiconductor company still struggling with their 32nm/28nm node Intel already on their 22nm (with FinFet to boot).

    • shizai

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