Can Qualcomm Regain Momentum With Snapdragon 821 Chipset?

July 14th, 2016 by Trefis Team
-9.36%
Downside
161
Market
146
Trefis
QCOM: Qualcomm logo
QCOM
Qualcomm

For years, Qualcomm  (NYSE:QCOM) has been a leader in the modem and application processor market for smartphones. However, Qualcomm suffered a major setback in 2015 when performance issues with its premium chipset, Snapdragon 810, induced some of its key customers to use their own SOC. Things improved for the company after the launch of  Snapdragon 820 chipset, which had better performance than its predecessor. The company now plans to roll-out Snapdragon 821, which is expected to be faster than Snapdragon 820. Below we compare the performance of the three versions of Snapdragon chipset and provide possible scenarios that can result in a change in our price estimate for Qualcomm:

Perfomance Spec

We can think of three possible scenarios for Qualcomm with the launch of Snapdragon 821. Consider this:

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A) What if Qualcomm’s chipset market share improves by 5 percentage points in 2017?

Scen_1

Rationale For The Above Scenario:

  • Qualcomm suffered a major setback in 2015 when performance issues with its premium chipset, Snapdragon 810, induced one of its largest customers, Samsung, to use its own SOC. Qualcomm’s follow-on Snapdragon 820 and 821 should give the company a chance to clear the decks and regain share.
  • The company stands a chance to improve the average selling price and the number of chipsets sold by successfully commercializing Snapdragon 821 chipset.
  • Qualcomm’s competitor MediaTek has been operating at very thin margins. There is a chance that it might lose some of its market share to Qualcomm going ahead.

B) What if Qualcomm is able to retain its 2015 chipset market share for the next two years?

Scen_2

Rationale For The Above Scenario:

  • Launch of Snapdragon 821 chipset is likely to fend off competition from smaller players such as MediaTek and Huawei.
  • Qualcomm is planning a careful roll-out of Snapdragon 821 and it is not stopping the sales of Snaprdragon 820 chipset. This might help the company retain its market share.

C) What If Snapdragon 821 chipset backfires like 810 and Qualcomm sees market share decline of 5% in 2017?

Scen_4

Rationale For The Above Scenario:

i) When Qualcomm’s market share had been growing in 2014, it was very hard to anticipate that the company would suffer a setback due to performance issues associated with Snapdragon 810. Though the probability of such a situation reoccurring is low we cannot completely ignore this scenario.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Qualcomm.