Qualcomm battled rival Broadcom’s hostile takeover bid
earlier this year — probably the biggest threat to the
company in its 33-year history — it continued to pour
money into developing next generation 5G wireless
aim was to speed up the rollout of ultra-fast 5G
networks — where Qualcomm believes it has a lead on
was supposed to be in 2020," said Qualcomm
President Cristiano Amon in an interview last week.
"In the middle of the biggest crisis we’ve had,
we maintained the level of research and development
spending in order to accelerate 5G by more than a
the question is will the maneuver pay off, or will it
wind up being another misstep in what has been a rough
two years for Qualcomm, San Diego’s largest publicly
barely escaped the clutches of Broadcom, surviving
because of intervention by the Trump administration. It
recently laid off more than 1,200 San Diego workers in a
cost-cutting pledge aimed at appeasing frustrated
21 months, it tried to acquire Dutch automotive
chip-maker NXP Semiconductors, only to have the $43
billion deal derailed by Chinese regulators amid trade
tensions with the U.S.
it continues to fight legal attacks from Apple and
antitrust regulators over its patent licensing
practices, including a pending lawsuit from the U.S.
Federal Trade Commission.
fines and Apple’s refusal to pay patent royalties have
marred Qualcomm’s financial results. Revenue last year
fell nearly 3 percent to $22.3 billion. Earnings slid 57
percent to $2.5 billion.
the Apple fight showing no signs of ending and the
collapse of the NXP deal, Qualcomm is in reset mode.
Amon said its strategy hasn’t changed. It is betting
cellular technologies will expand into many new
industries beyond smartphones. That, coupled with the
roll out of 5G networks, will get the company back on
typically does well when the mobile industry upgrades to
a new generation of technology. Revenue for its chip
division doubled during the transition from third
generation 3G networks to today’s 4G LTE.
of Qualcomm’s early investments, we are going to see
5G launch in the United States as early as April
2019," said Amon. "You are going to be able to
buy a 5G phone."
operators are committed to 5G, and they can achieve a
critical mass of coverage relatively quickly by adding
5G equipment to existing cell towers, said Amon.
sees a world that is quickly becoming hyper-connected,
with wireless technology expanding into connected cars,
health care devices, smart cities and smart homes,
automated factories and security systems.
spent the last 30 years connecting people. We will spend
the next 30 years connecting things, said Brian Modoff,
Qualcomm’s executive vice president for strategy and
acquisitions, at a recent event. "The exciting
thing for the company is we are leveraging what we are
already good at."
Qualcomm set its sights on NXP in October 2016, it had
relatively few customers outside of the smartphone
market. Buying NXP would have opened sales avenues into
NXP’s 30,000-plus customer base — diversifying
the nearly two years since, however, Qualcomm has
managed to expand its customer base on its own. It now
totals 9,000 — including 18 of the top 25 global auto
brands, myriad Internet of Things companies, consumer
electronics firms and Wi-Fi networking gear makers.
wanted NXP, but we didn’t sit still," said Amon.
"During those 21 months we had been waiting, we
executed on that exact strategy to the point where we
were able to generate $5 billion in (non-smartphone)
revenue in the chip business — 70 percent growth over
those two years. That gives us confidence to continue
the strategy because mobile is disrupting all these
connected cars, Qualcomm has achieved a $5 billion order
backlog — mostly in onboard navigation/entertainment
and connectivity systems. It is working to redesign
cockpits to bring more information to the dashboard,
such as blind spot camera displays.
is also working on technology that allows cars to
communicate directly with nearby vehicles, smartphone
carrying pedestrians, connected stoplights and other
smart cities infrastructure.
is huge potential for this technology to be important
for autonomous driving and safety," said Amon.
will become the main fabric for this hyper-connected
world, according to Qualcomm. In cities, it promises to
deliver speeds approaching one gigabit per second for
average users outdoors on a loaded network, compared
with 4G LTE speeds under 50 megabits per second under
the same conditions. It also will deliver imperceptible
and in rural areas, 5G will significantly boost speeds
and add more capacity, but it probably will not reach
the same level as in big cities — at least initially.
said all of Qualcomm’s top-tier smartphone customers
plan to release 5G Android phones next year. While
adoption by users is hard to predict, Amon is
have not met a person who does not want faster
Internet," he said. "You get a 4K display with
a better camera and take a fantastic picture, you want
to upload that as fast as possible and share it."
second thing is the world has gone to unlimited data
plans. An operator deploying a 5G network has a lower
cost per bit. So there is an incentive to move the
unlimited plans over to 5G."
emergence of 5G — which is more complex than 4G —
also could propel Qualcomm’s efforts to supply more
silicon to smartphones — especially power amplifiers,
switches, antenna tuners and other radio frequency
these growth paths, the fight with Apple continues to
weigh on the company.
stopped paying patent royalties to Qualcomm more than a
year ago. During a recent earnings conference call,
Qualcomm said it no longer expects to supply cellular
radio chips for upcoming iPhone models slated to be
unveiled by Apple in an event on Sept. 12.
said Qualcomm is forecasting "zero" chip sales
into new iPhones for the next three years. Previously,
Qualcomm supplied radio chips for about half of the
iPhone 8s and iPhone X models globally, with Intel
providing the rest.
are basically planning for zero because of this
dispute," he said. "We want stability in our
company. Of course, it puts pressure for us to grow into
all these new areas, and that is what we are
the Apple fight rages on in courts worldwide, Qualcomm
has made progress with some regulators and Samsung —
the world’s largest smartphone maker.
company reached a settlement with Taiwan’s
anti-monopoly regulator that reduced a fine from more
than $770 million to $93 million. The settlement also
eliminated demands that Qualcomm change its patent
licensing business model.
recently signed on to license Qualcomm’s entire patent
portfolio including 5G — both standard essential and
non-essential patents. Samsung withdrew its support for
fines and business model changes imposed against
Qualcomm by South Korea’s antitrust regulator, which
Qualcomm is now appealing in court.
has created a new patent licensing framework. It
includes 5G patents without raising rates, and allows
device makers to license a smaller pool of patents at a
reduced rate. It also caps the maximum amount device
makers pay in royalties.
take issue with so many of the objections to the
licensing practice," said Alex Rogers, head of
Qualcomm’s technology licensing arm. "They are
high level accusations that when you look at the facts,
the facts don’t support them. But aside from that,
what is in the best interest of the licensing business
is to just move away from the conflict, move away from
the instability, because there is plenty of opportunity
in front of us."
5G turns out to be a hit next year — and if Qualcomm
is correct that it has a technology lead over Intel and
other competitors — that could create a path for a
settlement with Apple, said Mike Walkley, an analyst
with Canaccord Genuity.
Qualcomm is anticipating not shipping modems to Apple’s
next generation smartphones launching later this year,
we believe Apple will need to consider moving back to
Qualcomm should it decide to launch 5G iPhones in the
coming years," said Walkley in a research note.
"We believe this could help Apple and Qualcomm
settle their lawsuits and reach a licensing agreement,
especially given Qualcomm’s more transparent 5G