According to a recent report, Qualcomm (NASDAQ:QCOM) has lowered its chipsets pricing in China in order to compete with low cost vendors such as MediaTek.  We believe this is a sensible move by Qualcomm as it strives to capture the growth opportunity in emerging markets where telecom operators have started to adopt the 3G technology. China and India are the two largest telecom markets and it make sense for Qualcomm to find ways to compete in this market. Other than MediaTek, Qualcomm competes with Intel (NASDAQ:INTC) and Texas Instruments (NYSE:TXN) in the mobile chipset market.
Our $63 price estimate for Qualcomm stock is about 15% above market price.
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Qualcomm a leading player in chipset market
According to Strategy Analytics, Qualcomm is the leading player in the baseband chipset market with a share of around 42% followed by Intel, MediaTek and Texas Instruments.  In order to compete in emerging markets like China, Qualcomm has started to cut its chipsets pricing. Although this strategy will reduce the average chipsets pricing for Qualcomm, it will help it gain market share.
Capturing emerging markets a big opportunity for Qualcomm
3G mobile phone technology is based in large part on CDMA2000 and WCDMA protocols and is considered better than the traditional GSM technology. Qualcomm’s chipsets support 3G technology, which helps provide faster internet access, download speeds and increased network capacity and flexibility. China and India are the two biggest telecom markets in the world with close to a billion mobile subscribers in each country, and the transition from 2G to 3G technology is underway at a full swing at these regions. According to Wireless Intelligence, 3G net additions in emerging regions are expected to surpass 2G net additions starting in the second calendar quarter of 2012. Notes:
- Qualcomm competing with MediaTek in China market with price competition, DigiTimes, December 6th, 2011 [↩]
- Strategy Analytics: Cellular Baseband Revenue Reached $3.63 Billion in Q2 2011, October 4th, 2011 [↩]
- Qualcomm fiscal year ending 2011 SEC filings [↩]