Qualcomm is the quintessential American tech company steeped it engineering excellence. Its genesis was the development of a new wireless standard called CDMA. Initially, it was written off as a failure, often ridiculed by its larger global rivals. It created a niche by getting American mobile providers like Verizon, Sprint and South Korean mobile providers like SK Telecom to adopt its technology. Qualcomm found redemption as the mobile providers often had the best networks in their respective countries, better than the globally dominant GSM standard. It found salvation when a variant of its CDMA standard was adopted as the global 3G standard called Wideband CDMA or to those who still harbored old animosities UMTS. It then became the global leader in 4G by holding most of the patents on the OFDM technology that underlies LTE.
By the late 2010s, Qualcomm that engineered itself through superior technology to unprecedented success was faced with five major problems that no engineering solution could easily fix.
- Despite being the premier mobile technology company growth had slowed down as upstarts like MediaTek was gaining market share, first in the entry level, highly price sensitive segment but was closing the performance gap between the solutions of the two companies. Qualcomm still dominated the flagship segment, but MediaTek dominated the entry level.
- Broadcom launched a hostile takeover to buy Qualcomm as investors were frustrated with low stock returns. Broadcom was only thwarted through the intervention of the US government.
- Qualcomm’s largest customer Apple with the support of the Department of Justice was using the courts as a price negotiation tool.
- The Android smartphone market was increasingly concentrating with Samsung and Chinese providers driving other manufacturers out of the market. Former mobile phone giants like LG and HTC exited the market.
- The relationship between the United States and China was becoming increasingly hostile. The US government instituted unprecedented sanctions against Huawei and imposed trade restrictions on semi-conductors.
Qualcomm CEOs are engineers at heart, Irwin Jacobs, the legendary founder; his son Paul, and Steve Mollenkopf. While Cristiano Amon is also an engineer has cut his chops as President of Qualcomm by spearheading the diversification of Qualcomm into more business segments and therefore to enable Qualcomm to participate in more growth sectors.
Under Cristiano Amon the company is continuing to focus on mobile and IoT but is expanding into computing and automotive. By doing so Qualcomm has expanded its addressable market from $15 billion to over $700 billion. The impact has been almost immediate. Qualcomm has now a $30 billion design win pipeline until 2030.
How did he do this? Qualcomm purchased several companies to strengthen its position in the respective sectors. It bought Cellwize and Augmented Pixels to improve its positioning in mobile, Clair AIR to strengthen its capabilities in the AR/VR area. But most importantly, Qualcomm bought Nuvia, a company focusing on ARM-based computing solutions and Arriver, a company with particular strength in advanced driver assistance software and hardware. And just a last week, Qualcomm acquired Autotalks, a fabless chipmaker making silicon and systems-on-chip for automotive safety.
The Nuvia acquisition is laying the ground work to strengthen Qualcomm’s core base of computing, just like the acquisition of P.A. Semi in 2008 did for Apple. P.A. Semi focused on low power processors and brought to Apple the expertise to build first the A-series chips that have powered iPhones since 2010 and now the M-series chips that were launched in 2020. If Apple’s success is any indication then ARM-based processors are going to be the processors of the foreseeable future. The power envelope of compute power, electric power consumption and heat generation are not on the side of x86 processors, but ARM-based processors. It could also help Qualcomm to close the mobile processor speed gap between itself and Apple A-series processors and increase the gap between Qualcomm and MediaTek processors. Faster, more powerful processors will also help in Qualcomm’s greatest growth market: automobiles.
Where Qualcomm is most likely to replicate the strong position it has in mobility is in electric vehicles. Qualcomm has created a comprehensive solution for automobile manufacturers called Snapdragon Digital Chassis. It combines safety and connectivity with entertainment, customization and upgradability. It takes the basic lessons of a smartphone and takes it to the automobile. The parallels and similarities as the car becomes essentially a mobile server are striking. Qualcomm is coming into this market at the right time when other’s have laid a foundation for the demand, but Qualcomm has the more comprehensive and elegant solution. Qualcomm has also the opportunity to provide a solution that rivals that of Apple. Apple’s Carplay service is viewed by many car manufacturers as a bear-hug take-over of a large part of the user interface between the drivers and passengers of the car most of the navigation and entertainment interface. Automobile manufacturers are especially sensitive due to the long-rumored Apple project to build their own electric car and Google’s Waymo autonomous car company. The car manufacturers know Apple and Google do not come in peace and do mean harm to them. Car manufacturers have to own the user interface between the vehicle and the customer, but know their solution has to be on-par if not better than that of Apple and Google. Working with Qualcomm gives them a chance to do that and so much more. In addition, while there exists significant brand loyalty for traditional car buyers with more than 50% of owners of one car brand to own a car from the same car brand, this loyalty does not exist when it comes to the switch to an electric vehicle. This levels the playing field and is an incredible threat to incumbents and opportunity for new market entrants. Tesla is the embodiment of this new generation of automobile manufacturers. While Tesla had to pioneer a lot of the systems themselves, the next generation electric vehicles can rely on integrated solutions from a company like Qualcomm. Car manufacturers like General Motors, Cadillac, Stellantis, and Mercedes-Benz as well as BMW, Hyundai, Nio and Volvo are in varying degrees of partnership with Qualcomm. Such an array of car manufacturers and a solution that offers breadth and depth gives Qualcomm critical mass to win the automotive market. Who would have thought three years ago?