What’s The Revenue Potential Of Qualcomm’s RF Front End Business?

by Trefis Team
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Qualcomm (NYSE:QCOM) has been ramping up sales at its RF Front End (RFFE) business – which includes the various components that come between the antenna and modem of a wireless device – as it looks to increase its share of smartphone component content as the wireless industry shifts from 4G towards 5G technology. The move could also help the company partly mitigate the impact of lower modem shipments and revenues, as its key customer Apple has shifted away from using Qualcomm chips on its latest smartphones. In this note, we take a look at how the RFFE business could scale up and how it could contribute to Qualcomm’s top line.

We have created an interactive dashboard analysis on the revenue potential of Qualcomm’s RF Front End business. You can modify our forecasts to arrive at your own estimates for the business, and see all of our Technology company data here.

How Qualcomm Could Add Value In The RFFE Market

While most flagship 4G phones that had Qualcomm modems relied on third parties for RF front end chips, Qualcomm is looking to change this going into the 5G era. 5G devices generally require a tighter coupling between the various components, and their systems are typically more complex to design, considering the high-frequency bands involved  (sub-6 GHz and mmWave bands). Qualcomm should be well-positioned in this regard, since it provides end-to-end solutions for the RF front end, including power amplifiers, filters, RF transceivers, and antenna tuners meaning that the entire modem to antenna portfolio can be built using Qualcomm components. This may not be possible using a single third-party vendor. Moreover, since the RFFE also has a direct impact on a device’s battery life, as well as reception, call quality, and data speeds, OEMs may prefer to stick to a single vendor like Qualcomm for their RF needs.

How Much Does Qualcomm Stand To Gain From These Chips?

While Qualcomm does not break down the revenues from its RF Front End business, the company noted that RF Front End sales almost doubled year-over-year during FY’18, while noting that it expects to grow RFFE revenues by a double-digit percentage in fiscal 2019. The company says that a majority of the 5G designs it’s working on with its first-generation X50 modem come with RF front-end attached. Moreover, the company’s second-generation 5G cellular modem unveiled in February, the Snapdragon X55, will be packaged inside its new mobile applications processor, increasing its reach to more mobile vendors.

Qualcomm shipped 804 million mobile station modem chips over 2019, and we expect the number to fall by over 10% in 2019, as Apple has stopped using Qualcomm modems on its latest flagship smartphones. We expect the metric to recover to 762 million by 2021. We estimate that about 3% of devices with Qualcomm modems will have its RFFE components in 2019, with the number rising to 20% by 2021, due to the acceleration of 5G network deployment and an increasing number of 5G handset launches. This could translate into just over 150 million RFFE packages shipped by 2021. If we assume an average selling price of $12 for these components (for perspective, the iPhone XS Max uses RF and Power amplifier components worth $15.50), it could add about $1.8 billion in revenues for Qualcomm by 2021. This would translate into roughly 8% of the company’s projected revenues for the year.

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