Broadcom (NASDAQ:BRCM) is widely recognized as the world leader in connectivity combo chips and the individual IP blocks -- Wi-Fi, Bluetooth, NFC, and GPS. Qualcomm (NASDAQ:QCOM), meanwhile, is widely recognized as the world leader in smartphone apps processors -- GPU, CPU, and cellular modem -- as well as a strong player in connectivity. These two companies have been on a collision course. Qualcomm hopes to gain connectivity share, and Broadcom seeks to gain cellular share. The big question for investors, however, is which player offers the better balance of risk and reward.

Understanding Qualcomm's sheer might
Qualcomm is an incredibly powerful force in the semiconductor industry. It has more than 50% of the smartphone applications-processor market, a near monopoly in the LTE modem market, and has an unmatched product stack -- from the lowest of the low-end smartphones to the highest-end smartphones and tablets. The company has aggressively integrated everything under the sun into its mobile SoCs, including cellular, connectivity, and even a nifty digital signal processor.

The company's chip sales were in excess of $16 billion, with operating profit nearing $4 billion during the company's recently ended fiscal 2013. On top of that, Qualcomm has the scale and the might to push its foundry partners to get it the best process technology. It also has the wherewithal to get designs built on the leading-edge process technologies before anybody else. Qualcomm is very much the Intel of mobile.

Broadcom's a worthy challenger
While Qualcomm's market capitalization is north of $120 billion, Broadcom's is just shy of $16 billion. Although one may initially think that this large disparity is due to chip sales, Qualcomm generates the vast majority of its profitability from patent licensing and the associated royalties -- Qualcomm gets a meaningful cut of almost every cellular device sold.

Broadcom, on the other hand, is a pure-play fabless chip company. Qualcomm's chip business was $16 billion larger than Broadcom's $8.3 billion expected revenue in the current year ), but it's a much smaller gap than the market cap deltas would suggest.

The product plans that Broadcom shared with investors look extremely compelling. While Broadcom's products during 2014 won't offer the breadth that Qualcomm's offer in this space, it is targeting the high-volume, low-cost markets at first. Additionally, the company made a point that it would be more aggressively pushing the performance envelope on future products, perhaps for launch in 2015. This would imply that the company would not only be able to take increasing share in the handset market, but that it could potentially play in tablets.

The company seems to be catching up very quickly with its cellular modem technology. Qualcomm will be sampling its Category 6 modem early in the first half of 2014. Broadcom comes a little later -- but not terribly so -- with its first Category 6 modem sampling in the first half of 2014,  and presumably shipping in late 2014/early 2015. This significantly closes the gap and allows Broadcom to finally have a shot at taking share in high-end smartphones on the cellular baseband side of things over the course of 2015.

The risk/reward appears to favor Broadcom
Qualcomm is the clear leader in this space. Nobody will deny this. However, for investors looking to generate outsized returns, there's usually more money to be made on an up-and-comer gaining meaningful share than there is in betting on the incumbent at the apex of its power -- if the bet works, that is. The incumbent is usually the incumbent for a reason.

That being said, Broadcom is an extremely solid company with a very engineering-centric culture, much like Qualcomm. While Qualcomm is certainly best of breed in anything wireless, and while its patent royalty stream is just absolutely incredible, market share is now Qualcomm's to lose.

That's not to say that Qualcomm will lose meaningful share. But if it does, Broadcom's stock has plenty of room to run, while Qualcomm's could see multiple compression.

Ashraf Eassa owns shares of Broadcom. The Motley Fool owns shares of Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.