Qualcomm Is Hardly Threatened By Intel’s LTE Inroads

by Trefis Team
Rate   |   votes   |   Share

Qualcomm’s (NASDAQ:QCOM) dominance in the 4G LTE market has spurred Intel (NASDAQ:INTC) into finally announcing its first multi-mode LTE modem this week. The PC giant has long lagged Qualcomm in the wireless space but it seems to be leveraging its 2010 acquisition of Infineon to slowly catch up. Intel has been hard at work not only improving the power efficiency of its Atom app processors – long considered the bane of x86-based chipsets in mobile – but also improving the wireless capabilities of its baseband modems. The multi-mode XMM 7160 modem, which is compatible with 15 LTE bands  and will start shipping by the end of the month, allows Intel to close the gap with Qualcomm and is a big improvement over its earlier single-mode LTE modem. The next step for Intel will be to increase the compatibility of its basebands with the rest of about 40 LTE bands that exist around the world, as well as try to integrate these capabilities on to a single Atom app processor.

However, both these technological advancements have already been achieved by Qualcomm, which has in fact gone ahead and made its basebands compatible with LTE-Advanced – a next-gen LTE technology – as well. In order to bridge the gap, Intel recently acquired Fujitsu’s wireless arm, which should give it the expertise to make its basebands compatible with the other LTE spectrum bands. [1] With carriers around the world transitioning to high-speed 4G LTE networks, it has become imperative for mobile semiconductor companies to build a robust LTE portfolio to be able to tap the high future demand. Although competition is bound to increase further going forward, we believe that Qualcomm’s early LTE lead, its continuous investments in R&D and the depth of its customer relationships should hold it in good stead going forward. Our $70 price estimate for Qualcomm is about 5% ahead of the current market price.

See our complete analysis for Qualcomm stock here

LTE investments burgeoning

The 4G LTE market is rapidly expanding as carriers realize the benefits of running a network that is more efficient and has more data-carrying capacity than older 2G/3G networks. Carriers in the developed regions of Japan, South Korea and the U.S. are leading the way, and those in emerging markets such as China are likely to start LTE deployments in the coming months. LTE compatibility is therefore a prerequisite for many smartphones that are being released, especially at the high-end. Qualcomm has taken a big early lead in this market, having come to market first with its LTE-capable baseband chipsets. Of the 47 million LTE-capable chipsets that were shipped last year, Qualcomm accounted for nearly 86% of the market. Q1 2013 saw the share increase to nearly 97%. The gap between Qualcomm and rivals can be gauged from the fact that while competitors have started bringing their first LTE basebands to market only recently, Qualcomm’s chipsets are in their third-generation already.

LTE innovation keeps Qualcomm ahead of the pack

Due to the early LTE entry, Qualcomm has also managed to forge further ahead of rivals in LTE innovation such as multi-mode compatibility and integration with app processors. It has solved the problem of LTE fragmentation, or carriers deploying their networks many different LTE bands worldwide, with its recently launched RF360 chipset that allows device makers to release just a single version of a handset for all LTE markets. It has also achieved LTE integration with its Snapdragon app processors, which has made it easier for handset manufacturers to develop more power-efficient smartphones without making design compromises.

However, competition in the LTE market is slowly growing with Samsung and Nvidia having made their Exynos and Tegra line of app processors LTE-compatible. Intel is also working on integrating its multi-mode basebands onto the Atom app processors by sometime next year. LTE adoption, outside the developed regions of U.S., Japan and South Korea, is still in a very nascent stage and competition in the semiconductor market is bound to heighten in the coming years. But we expect Qualcomm’s technological superiority to help it hold the fort in the near term. This could be seen in Samsung’s decision to launch the Galaxy S4 with Qualcomm’s chipsets for LTE markets despite having a LTE-compatible chipset of its own. While Qualcomm’s huge initial market share is likely to decline over time due to increasing competition, the overall growth in the LTE market should help offset some of that impact.

Understand How a Company’s Products Impact its Stock Price at Trefis

  1. Intel buys Fujitsu RF unit to beef up LTE expertise – FierceWireless, August 13th, 2013 []
Rate   |   votes   |   Share


Name (Required)
Email (Required, but never displayed)
Be the first to comment!