Although Qualcomm (NASDAQ:QCOM) is the largest seller of chipsets for CDMA mobile phones, its market share has seen a consistent decline over the years. We expect the share declines to continue over the Trefis forecast period, however a slower decline than our forecast could create an upside of around 5% for Qualcomm’s stock.
We currently have a Trefis price estimate of around $48 for Qualcomm’s stock, about 18% above the current market price of around $41. Qualcomm holds several patents for CDMA and WCDMA technology, and its chipsets are used in mobile phones made by companies like Samsung, LG, Motorola (NYSE:MOT) and Nokia (NYSE:NOK). Qualcomm’s share decline could benefit competitors Infineon, Texas Instruments (NYSE:TXN), and Broadcom (NASDAQ:BRCM) who are trying hard to mark their presence in the lucrative mobile chipsets market.
In the past, Qualcomm’s CDMA chipset market share decreased from around 81% in 2005 to 69% in 2009 mainly because Samsung diversified its business by including Infineon, in addition to Qualcomm, to its supplier list. It should also be noted that nearly 80% of Qualcomm’s WCDMA revenues come from Samsung and LG, indicating Qualcomm’s heavy dependence on these two companies for its mobile chipset business.
The average of Trefis member forecasts for Qualcomm CDMA Chipset Market Share indicate a projected decrease from around 71% in 2010 to 66.5% 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 5% to the Trefis price estimate for QCOM stock. Qualcomm should however watch out for Infineon, which is gaining tremendous credibility after its 3G iPhone design win from Apple (NASDAQ:AAPL). Moreover, Motorola’s declining share in handsets market could prove to be a negative for Qualcomm’s business.
Disagree? 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.
