Qualcomm’s New Chip Can Drive Apple’s iPhone Market Share
Qualcomm (NASDAQ:QCOM) is reported to have signed a deal with Apple (NASDAQ:AAPL) to make chips for its ‘World iPhone’ which is designed for compatibility with mobile networks worldwide. Qualcomm’s chip is a hybrid microchip that can support fast 3G connections on the GSM mobile phone network, common in Africa and Europe, as well as on the CDMA 2000 network, common in the US and China.
We estimate that the iPhone constitutes close to 52% of Apple’s value, meaning that the success of a World iPhone can have a significant impact on Apple’s stock. Below we discuss how the deal could impact Apple and Qualcomm.
Impact on Apple
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One iPhone for multiple carriers
Apple can widen the reach of the iPhone by making a single phone that can be sold to multiple carriers like Verizon (NYSE: VZ), Sprint (NYSE: S), AT&T (NYSE: T) in the US as well as carriers internationally. In addition, such a phone would be more attractive to business customers that need international compatibility for their phones.
iPhone Overtakes BlackBerry in the Smartphone Segment
We believe the World iPhone will help Apple to overtake RIM’s (NASDAQ:RIMM) BlackBerry. We believe the iPhone will replace the BlackBerry as the leading smartphone in the US by 2011.
We expect iPhone Market Share in Mobile Phones to increase from 3.2% in 2010 to about 11% by the end of Trefis forecast period.
You can modify our forecast above to see how Apple’s stock price would be impacted if Apple’s market share increased even higher than we forecast.
Impact on Qualcomm
Qualcomm makes money in part through the sale of mobile phone chipsets to phone makers like Nokia and Motorola. Through this deal, Qualcomm may be able to increase its share in the mobile phone chipset market.
Despite the promise of the iPhone, we currently forecast a decline in Qualcomm’s CDMA chipset market share from 66% in 2009 to 59% by the end of Trefis forecast period. Qualcomm faces tough competition from players like Texas Instruments and Infineon. Furthermore, the company’s mobile chipset business is over dependent on customers Samsung and LG which have begun to diversify their chipset supplier base.
You can modify the chart above to see how Qualcomm’s stock price will be impacted if its chipset market share were to rise instead of decline in the future.
For additional analysis and forecasts, here is our complete model for Qualcomm’s stock and Apple’s stock.