Qualcomm Benefits as CDMA-Enabled Mobile Phone Sales Grow
The penetration of CDMA technology in mobile phones sold has risen consistently from an estimated 22% in 2005 to 40% in 2009, [1] driven by attractive features and advantages offered by CDMA over GSM in 3G technology, and comparable prices of CDMA phones versus GSM phones. As mobile network operators gradually migrate of to CDMA from GSM in emerging markets, we expect the rate of CDMA penetration to increase, however at a slower pace, due to a larger mobile phone base.
Qualcomm (NASDAQ:QCOM), a major CDMA mobile phone chipsets manufacturer, is likely to benefit significantly from rising CDMA penetration. Qualcomm competes with other mobile chipset makers like Texas Instruments (NYSE:TXN), Infineon and Broadcom (NASDAQ:BRCM). We currently have a Trefis price estimate of $48.12 for Qualcomm’s stock, about 6% above the current market price of $45.44.
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The penetration of CDMA in Mobile Phones Sold represents the percentage of worldwide mobile phones sold with CDMA-enabled technology. CDMA includes other sub-categories like CDMA2000 (the 3G counterpart to cdmaOne technology), Wide-band CDMA (WCDMA), Long-Term Evolution (LTE) and OFDMA.
In comparison to analog and GSM-based technologies, 3G CDMA technology has advantages such as increased network capacity, network flexibility, compatibility with internet protocols, higher capacity for data and faster access to Internet. Emerging markets again play an important role in CDMA penetration. This is because GSM accounts for almost 70% of the mobile phone market in emerging markets, and WCDMA is specifically designed to be compatible with GSM core network. With advanced features on 3G and no major technology costs incurred, mobile network providers will be encouraged to migrate from GSM to CDMA. With competitive pricing, consumers too wouldn’t hesitate to move on to CDMA handsets from GSM handsets.
The average of Trefis member forecasts for Penetration of CDMA in Mobile Phones Sold indicate an increase from 53.4% in 2010 to around 74% by 2016, compared to the baseline Trefis estimate of an increase from 48.4% in 2010 to 68.4% by the end of the Trefis forecast period. The member estimates imply an upside of 6% 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 Penetration of CDMA in Mobile Phones Sold.
Our complete analysis for Qualcomm’s stock is here.
Notes:
1. We have calculated Penetration of CDMA in Mobile Phones Sold as: CDMA Phones Sold/Global Mobile Phone Units. Qualcomm reports CDMA Phones Sold in its SEC filings. Data on Global Mobile Phone Units is taken from publicly released information by market research firm Gartner.