Is IoT The Next Big Thing For Qualcomm?

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According to a recent report, Qualcomm (NYSE:QCOM) holds the top spot in a ranking of  the total number of Internet of Things patent holders.  It also leads with regard to the number of high strength patents held.  Currently, the company garners most of its income by selling modem chipsets and by collecting licensing revenues from from its very strong hold CDMA and 4G LTE technologies. However, the fact that Qualcomm holds highest number of essential patents in the IoT technologies indicates that it is betting high on the growth of IoT market. Below we discuss the key reasons as to why Qualcomm is ramping up its investments in developing IoT technologies.

Need To Diversify And The Massive Growth Potential of IoT

Though Qualcomm remains a leader in the baseband processor and application processor market, its growth of late has been plagued by the following reasons:

  • Slowdown in smartphone sales
  • Competition from low cost chipset makers such as Mediatek
  • Non-compliance of licensing terms in China.
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Given the massive growth potential of the IoT market, Qualcomm stands a significant opportunity to revive growth in its business by investing in key IoT technologies. According to a report by Mckinsey the number of connected devices are expected to grow from 8.5 billion in 2013 to approximately 28 billion in 2020. Further, Qualcomm’s rival Intel has already started providing revenue figures for its Internet of Things group, which is indicative of the fact that the company is eyeing the group to be a major revenue driver in the future.

Low Power Requirement In IoT Devices 

The billions of connected devices in the McKinsey forecast will require an embedded processor and radio to enable connectivity and process data. However, one important factor that will determine the growth in  IoT adoption will be the power efficiency of these devices. One key method to reduce power consumption in these devices will require the use power-efficient processors. Qualcomm seems to be advantageously positioned to capture this market as it can utilize its experience in making power efficient mobile phone chipsets in designing power efficient processors for IoT devices too. The company is one among the few of the top-tier ARM licensees that hold both architectural and core licenses from ARM. It is worth noting that Qualcomm lost a socket on the Samsung Galaxy 6 due to performance issues associated with the Snapdragon 810 processor, when  it used an off-the-shelf ARM core instead of its custom core to build it.

In the figure below we provide the top five patent holders in Internet of Things:

 

IoTpatents

IoT_High_strength

                                                         Source: Quartz

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