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Qualcomm Is Enabling iBeacon Adoption

On Monday, Qualcomm (NASDAQ: QCOM  ) announced its Gimbal proximity beacons, which operate with Apple's (NASDAQ: AAPL  ) iBeacon feature in iOS 7. Support for Android devices is on the way soon.

Qualcomm, as a chipmaker, benefits from superior cost structure and is able to sell its proximity beacons for as little as $5. Comparatively, other iBeacons are selling for around $40 each. Qualcomm's pricing will likely accelerate adoption rates by stores, restaurants, ballparks, museums, and anyone else who can think up a clever way to use the technology.

An iBeacon that supports iOS and Android
Aside from price, Qualcomm provides an all-in-one solution for developing hyper-location aware apps on iOS and Android. Although it's possible to develop iBeacon apps for Android through a third-party SDK, Qualcomm will provide all the tools necessary under one roof.

It's unlikely Apple will ever provide native support for Android iBeacon apps. There's certainly no chance that it will compete on price. (It never does.) And there's only so much Apple can do to make the user experience of managing these bluetooth transmitters superior to Gimbal. Qualcomm may have killed iBeacon sales before they ever got off the ground.

The real benefits
Neither Qualcomm or Apple, though, seem to have planned on making piles of cash from these beacon devices directly. At $5 a pop, Qualcomm would have to sell an exorbitant amount of beacons to make an impact on its top line, which came in near $25 billion in fiscal 2013. No, Qualcomm and Apple will benefit from the satellite effects of these devices.

Qualcomm is actively working to make the Internet-of-things a reality. These diminutive data deliverers can be leveraged to work with any device that has a bluetooth 4.0 chip installed. Guess who's going to make the chips in all of those bluetooth enabled devices -- Qualcomm.

Apple, for its part, may see an increase in the use of iOS devices in stores and restaurants, where it has already had a fair amount of success. Apple has enabled every iOS device made in the last two years with the capability of working as an iBeacon itself. This could accelerate the trend of stores using iPads as POS systems or using them as dynamic displays, especially if it's easy to make them interoperable with other beacons.

Both companies are trying to leverage the technology to sell more of its big money makers. The same is true for eBay (NASDAQ: EBAY  ) , which released its own bluetooth beacon a few months ago to support in-store payments using PayPal. For all intents and purposes, none of these companies care much who actually sells the beacon device, just that people start using them.

eBay should be worried, however, about the potential for new mobile payment processors encroaching on its turf by effectively utilizing these BLE beacons. I believe Apple is one such threat.

Qualcomm's impact
Qualcomm's price-advantage is huge, but it's unlikely it costs the company that much less to produce its Gimbal beacons as it does other manufacturers to make theirs. And it's not clear that the company is taking a low-margin, high-volume approach with the product either. The company is used to huge gross-margins on its product.

Instead, it seems to be using these devices as a launching point to sell more high-margin products. The same is true for Apple and eBay. The more cheap Gimbals out in the wild, the better it is for each company.

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  • Report this Comment On December 10, 2013, at 9:58 PM, twolf2919 wrote:

    "Qualcomm may have killed iBeacon sales before they ever got off the ground."

    Where did you get the idea that Apple ever intended to sell iBeacon devices? As you mention, Apple has iBeacon capability built into every iOS device sold in the last couple years (i.e. every device supporting the low-energy version of Bluetooth). I believe Apple's plan is simply to make its TABLET devices - which have already gotten a great following among merchants as point-of-sale terminals (esp. together with a Square dongle) - even more indispensable. Imagine a store owner being able to send customers whatever store-specific information they can dream up - directly from the iPad they already own!

    Apple's intent is to make its devices so valuable, nobody would think to move to a competitor.

  • Report this Comment On December 11, 2013, at 7:46 AM, adamlevy wrote:

    @twolf2919 If you read the rest of the article, I say exactly that. Apple wants to expand its market for iDevices. It doesn't care who sells the beacon device.

    But there is definitely a market of third-party vendors, and it's unclear whether Apple is making the iBeacons itself or not. All of the available options are priced much higher than Qualcomm's though. So Qualcomm may have just killed the competition, whether that's Apple or a no-name manufacturer.

  • Report this Comment On January 22, 2014, at 6:13 PM, bopunt wrote:

    the gimbals use a proprietary protocol that is not compatible with the iBeacon standard. You are forced to use qualcomm's cloud solution with these products. And iBeacons are also supported on android, as where the gimbal support for android is TBA.

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