How Do We Expect Qualcomm’s Licensing Segment Revenues To Grow In The Next 5 Years?

We expect Qualcomm’s Licensing segment (QTL) revenues to decline by approximately $2 billion in the next five years. At present, the segment accounts for about 31% of the company’s overall revenues and we expect this figure to decline to 26% by 2021. This is essentially because we expect Qualcomm to realize lower licensing revenues due to a possible decline in the royalty rates it charges from its licensees. It must be noted that the company charges royalties on the basis of sales by its licensees incorporating its intellectual property; and a one time licensing fees from chipset vendors to use its proprietary CDMA and OFDMA technologies. We expect Qualcomm’s royalty rate to further decline going ahead, as we remain concerned about the recent run of investigations on the royalty rates the company charges from its licensees. We also expect 3G/4G device prices to decline over our review period, which will further impact Qualcomm’s revenues from this segment. In the table below we show how we expect Qualcomm’s revenues from this segment to grow in the next 5 years:

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