How Can Qualcomm’s Chipset Revenues Grow In The Next 5 Years?

• We believe that Qualcomm’s revenues from QCT(Qualcomm CDMA Technologies) segment, which includes the sales from its chipsets, will decline by around $600 million in the next five years.

Reasons for the decline:

• We believe Qualcomm should benefit directly as the mobile phone penetration in emerging markets increases incoming years, driven in part by lower mobile phones prices. We expect a decline in chipset pricing as well.
• Qualcomm’s chipset prices declined significantly in 2014 and 2015 due to heavy competition in the segment. We estimate the mobile device chipset pricing to continue declining over our review period. This is primarily due to the fact that smartphone makers are investing heavily in having their own processors to cut down device costs and improve their margins. Furthermore, Qualcomm is likely to face pricing pressures as it looks to tap the high-growth markets such as India and China.
• Nevertheless, the company is betting big on upcoming revolutionary technologies such as 5G, drones and virtual reality headsets. Going ahead, Qualcomm has an opportunity to improve its chipset revenues from this segment, if it is successful in capitalizing on these technologies.

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