In what could pose a big potential threat to Qualcomm’s (NASDAQ:QCOM) dominance in the smartphone chipset market, Nvidia (NASDAQ:NVDA) has managed to integrate LTE capabilities on a Tegra chipset. The Tegra 4i, which is touted to be about half the size of Qualcomm’s competing Snapdragon, is Nvidia’s first app processor with an integrated LTE modem and will help make the Tegra more accessible to low- to mid-level smartphones. Nvidia also claims that the 4i generates performance that is almost 2.5 times better than the recently introduced Snapdragon 800 on a per square millimeter basis. While third-party performance reviews aren’t out yet, if Nvidia’s claims stand, it could emerge as a strong rival to Qualcomm, especially in the emerging markets where the focus is more on cost minimization and power efficiency.
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Nvidia’s first true smartphone play
Nvidia’s Tegra chipsets have so far found a wider acceptance among tablets than smartphones. Being among the first to launch a quad-core chipset with a strong graphics performance to boot, Nvidia found a place in many tablets including Google’s (NASDAQ:GOOG) Nexus 7 and Microsoft’s (NASDAQ:MSFT) Surface RT launched last year. However, the tablet success did not translate well to smartphones where strong baseband integration is key. With most handset manufacturers choosing to launch high-end smartphones with LTE support last year, Nvidia’s Tegra line lost out when pitted against Qualcomm’s baseband superiority and strong LTE integration.
However, Nvidia’s announcement of an LTE-integrated Tegra levels the playing field and allows it to compete with Qualcomm on an even keel. The smaller size of Tegra 4i makes it likely that it will be cheaper and more power-efficient than the other Tegras, making it an attractive option in low-end and mid-end smartphones. The LTE-integration brings in more advantages from a design and power-efficiency perspective and as its chipsets mature, Nvidia could chip away at Qualcomm’s market share in the coming years.
Little impact to Qualcomm in the near term
That said, Qualcomm’s LTE basebands are in their third generation already compared to Nvidia’s Icera chipsets which became LTE-compatible just last year. Being more mature, Qualcomm’s basebands still hold a big edge over competitors, and we don’t think that lead will erode easily in the near term. Moreover, Nvidia’s Tegra 4i is likely to feature in only a few phones later this year with more expected to debut only in spring 2014. Qualcomm, on the other hand, already has its LTE-integrated Snapdragons in smartphones and the first devices with next-gen Snapdragon 800 are slated to launch midway through 2013 itself.
Still, competition in the mobile processor market is increasing rapidly and Qualcomm will need to be on its heels to ward off the threat in the coming years. Broadcom, another relatively new entrant in the mobile market, recently introduced its first LTE-compatible baseband and is working on integrating this with its app processors as well. (see Broadcom Achieves LTE-Compatibility But Qualcomm Is Hardly Threatened) Currently, we estimate that Qualcomm’s market share within the CDMA device market will see steady increases from around 65% in 2012 to 67% by the end of our forecast period. However, if increasing competition from Nvidia, Broadcom and Intel in the coming years sees Qualcomm’s market share fall to about 55% by the end of our forecast period, there could be 7% downside to our $71 price estimate.