While the tech giants of the world battle it out in the hotly contested mobile market this holiday season, Qualcomm will be laughing all the way to the bank. Last week, we saw a host of announcements at the IFA 2012 from both Samsung (PINK:SSNLF) and Dell who unveiled their respective Windows RT tablets powered by Qualcomm (NASDAQ:QCOM) S4 chipsets. Samsung also debuted its first Qualcomm-powered Windows Phone 8 smartphone under the new ATIV brand. Ahead of the IFA, we saw LG taking the wraps off its upcoming flagship Optimus G smartphone powered by a quad-core S4 Pro, signaling at long last the entry of Qualcomm in the quad-core market. More recently, Nokia (NYSE:NOK) and Motorola unveiled new additions to their respective flagship brands and Apple (NASDAQ:AAPL) is expected to launch the iPhone 5 next week, all of which will also sport Qualcomm chipsets.
With competition heating up, the mobile market players are cranking out their best products to derive the maximum out of the upcoming holiday season. The number of Qualcomm-powered product launches that have been announced or will be announced in the coming weeks not only points to a strong demand for Qualcomm’s chipsets, but also an improving production situation at the 28nm chipset end, which has been supply-constrained for most of the year. With supply issues clearing up by the end of the year and demand continuing to remain strong, Qualcomm is well-positioned with its broad portfolio of chipsets and diversified customer base to make the most of its leading position in the mobile chipset market. We have a $69 price estimate for Qualcomm, about 15% ahead of the current market price.
A foot in every door
Qualcomm’s chipsets currently find a place in two of the most dominant mobile ecosystems worldwide, the Android and the iOS. While Apple uses Qualcomm’s baseband chipsets in both the iPhone and the iPad, many Android smartphones use Qualcomm’s stand-alone as well as baseband-integrated chipsets. Android and iOS account for a combined 85% of the market but the near-duopoly could break in the coming years with Microsoft making a reinvigorated assault on the mobile space with its Windows Phone 8 OS. But with Microsoft going with Qualcomm as the sole supplier of chipsets for WP8 handsets, Qualcomm has that base covered as well.
Also, with most of the high-end flagship smartphones supporting LTE, Qualcomm remains the LTE leader by quite a margin. Not only are its LTE baseband chipsets mature being three generations old already and built on a new 28nm technique that conserves space and power but also come integrated with its dual-core Snapdragon app processors. This LTE leadership has served Qualcomm well since it has kept competitors away from stealing market share. For example, Samsung’s Galaxy S III and HTC’s One X series had to be launched in the U.S. with a Snapdragon core since rival chipsets do not play well with Qualcomm’s LTE basebands. Competition is however slowly catching up with Nvidia recently announcing a LTE chipset that it plans to integrate into Tegra in 2013.
Where Qualcomm faces the most headwinds currently is the tablet space where Nvidia has been scoring quite a few wins lately, one of them being the much-touted Nexus 7. This has primarily been due to the quad-core Tegra 3 that Nvidia has been marketing well to device makers. However, Qualcomm has already demoed its own quad-core S4 Pro chipsets and is close to launching the first smartphone, the LG Optimus G, with the same. Dell’s and Samsung’s recently launched line of Windows RT tablets/hybrid PCs are also being powered by Qualcomm’s chipsets, which allays concerns that Qualcomm might be facing issues with getting Windows drivers to work with Snapdragon. With Microsoft looking to make a big splash in the tablet space and Apple dominating with the iPad currently, Qualcomm seems to have the ingredients in place to profit from the burgeoning demand in this yet nascent market as well.