Slower Decline in CDMA Chipset Share Can Help Qualcomm
Qualcomm’s (NASDAQ:QCOM) dominant position in CDMA chipsets market is being challenged by players like Texas Instruments (NYSE:TXN), Infineon, Broadcom (NASDAQ:BRCM) and Freescale. We estimate that Qualcomm’s CDMA chipset market share declined from 81% in 2005 to 69% in 2009, [1] partly because Samsung extended its suppliers list by adding Infineon, in addition to Qualcomm.
Since the mobile phone chipset business accounts for 45% of Qualcomm’s value, the stock is significantly impacted by CDMA chipset market share. We currently have a Trefis price estimate of $48 for Qualcomm’s stock, about 7% above the current market price of $44.
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Qualcomm’s CDMA chipsets are purchased by mobile handset vendors like Motorola (NYSE:MOT), Nokia (NYSE:NOK), Samsung, LG and HTC. Samsung and LG Electronics have historically constituted more than 20% of the Qualcomm’s revenues [2]. However, Samsung has been diversifying its vendor base to include companies like Broadcom and Infineon, and is reported to be developing its own LTE and WiMAX chipsets.
Motorola, another important Qualcomm customer, has seen a share decline in mobile handsets in recent years. This doesn’t bode well for Qualcomm. We expect the company’s declining trend in CDMA chipset share to continue over our forecast period.
The average of Trefis member forecasts for Qualcomm CDMA Chipset Market Share indicate a projected decrease from 72% in 2010 to 71% by 2016, compared to the baseline Trefis estimate of a decrease from around 66% in 2010 to 60% by the end of the Trefis forecast period. The member estimates imply an upside of 9% to the Trefis price estimate for Qualcomm’s stock.
You can drag the forecast trend-line above to express your own view, and see the sensitivity of Qualcomm’s stock to CDMA Chipset Market Share.
Our complete analysis for Qualcomm’s stock is here.
Notes:- We have calculated Qualcomm CDMA Chipset Market Share as: (CDMA Chipsets Sold) / (CDMA Phones Sold). Qualcomm reports CDMA Chipsets Sold and CDMA Phones Sold in its SEC filings. [↩]
- According to the company’s annual filings [↩]