How Can Mobile Chipset Pricing Impact Qualcomm’s Stock Price?
Qualcomm‘s chipset price decreased from an estimated $21 in 2007 to around $17 in 2010. We calculate the company’s chipset price using the following formula:
Qualcomm’s Chipset Price = Mobile Device Chipsets Revenues/MSM units sold
Prices rebounded in 2011 as multi-core and standalone chipsets became more popular, as opposed to integrated designs. The positive trend in the company’s chipset prices continued up to 2013, with LTE-compatible chipsets and the 28nm manufacturing process commanding a premium over the rest. However, prices declined significantly in 2014 and 2015 due to heavy competition in the segment. Furthermore, Qualcomm’s major customer Samsung built its own Exynos series of processors, which were used in its high-end phones such as Galaxy S6, replacing the Snapdragon 810.
Our Current Forecast: We currently forecast Qualcomm’s chipset pricing to continue to decline from $18 in 2015 to approximately $16 by the end of our forecast period. This is mainly because we believe that to compete effectively with its competitors, the company might have to lower its chipset prices going ahead. The company is facing stiff competition from MediaTek and Apple, that each have around 20% market share in the application processor market. Furthermore, Qualcomm is exposed to the risk it could lose market share to Chinese companies that have started manufacturing their own chipsets. Additionally, the company is likely to face pricing pressure in emerging markets such as China and India that are fast transitioning from 3G and 4G.
- With Smartphone Market Recovering, What To Expect From Qualcomm’s Q2 Results?
- Will Qualcomm Stock Return To Pre-Inflation Shock Highs Of $189?
- Will Qualcomm Stock Return To Pre-Inflation Shock Highs Of $190?
- With Expectations Low For Q4, Will Qualcomm Spring A Surprise?
- Will Qualcomm Stock Return To Pre-Inflation Shock Highs Of Over $180?
- Will Qualcomm Stock Recover To Highs Seen Prior To Inflation Shock?
An Alternative Scenario: With the strong adoption of Qualcomm’s premium smartphone chipset, Snapdragon 820, in more than 150 smartphone designs, the average selling price of the company’s chipsets has improved from an estimated $17 in Dec’15 to $20 in Sept’16. The company claims that it is seeing strong adoption for its modem shipments in adjacent businesses too. In addition, the company will also power Google’s much-awaited Pixel phones with its Snapdragon 821 chipset going ahead, which can positively impact the average selling price of Qualcomm’s chipsets. There could be 15% upside to our price estimate if higher priced chipsets in premium smartphones help Qualcomm improve the average pricing to $21 by the end of the forecast period.
See More at Trefis | View Interactive Institutional Research (Powered by Trefis)