Qualcomm (NASDAQ:QCOM), which competes with Texas Instruments (NYSE:TXN), Broadcom (NASDAQ:BRCM), and Marvell (NASDAQ:MRVL) in the mobile phone chipset market, recently announced that it will make its mobile chipsets compatible with emerging augmented reality (AR) technology. This technology allows mobile phone users to get information about any object or its surroundings by simply placing their phone camera against the object.
We believe that AR-enabled mobile phones will find many buyers in the future. In addition, Qualcomm’s ability to make this technology feasible through faster application processors, while optimizing the technology for its own chipsets, will give it an advantage over peers in the mobile chipset market. Our analysis follows below.
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We expect Qualcomm’s share of the CDMA chipset market to decline from 68% in 2009 to around 61% by the end of the Trefis forecast period. However, its share could benefit from mass adoption of AR technology. There could be an upside of 5% to the $42 Trefis price estimate for Qualcomm’s stock if it manages to maintain its current market share.
Here are three reasons why AR capability could benefit Qualcomm’s mobile chipset sales:
1. Augmented Reality is an attractive feature for users
AR offers compelling features that we expect will spur mass adoption of the technology. For example, users will be able to find information about a city by simply pointing their AR-enabled phones at nearby buildings. By pointing their phones at a particular street, similarly, users will be able to locate nearby restaurant menus and prices.
2. Qualcomm’s fast processors suit AR applications
Augmented reality technology requires fast mobile phone processors in order to superimpose information on camera images. Qualcomm’s Snapdragon is a high speed mobile phone application processor that currently offers speeds of 1 GHz. The next version of Snapdragon, expected to be released by the end of 2010, is expected to achieve 1.5 GHz. We believe that high processor speeds will give Qualcomm a competitive edge over competitors like Nvidia (NASDAQ:NVDA) and Texas Instruments.
3. Exclusive AR technology feature can boost its chipset sales
Qualcomm has the ability to optimize AR technology for its own chipsets. The new software would not be compatible with competing chipsets, an obvious boon to Qualcomm’s chipset sales.