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Every one of the "major" semiconductor companies vying for mobile processor dominance has something that it's really good at – it's "secret sauce." Historically, Qualcomm (NASDAQ: QCOM ) has been known for its modem/RF prowess and Intel (NASDAQ: INTC ) is known for being a world-class CPU designer. However, in the mobile system-on-chip world, a company needs to deliver a product that is best-in-class across the board to get noticed. Interestingly, it seems that everybody these days can design/license a competent CPU and GPU, leaving the main differentiator in smartphone processors to be the modem.
Intel is solidly No. 2 in modems today
There's no denying that Qualcomm is the top cellular modem vendor today and, as an added bonus, is also the strongest mobile SoC vendor. Across the various IPs necessary to build a SoC, Qualcomm is either No. 1 or No. 2 (depending on the benchmark and who you listen to), but it is so consistently good across the board that its SoCs are the choice for just about every "hero device" and even its mid-range and low-end solutions continue to aggressively take share against competitors.
However, a strong No. 2 is beginning to emerge in the form of Intel. Sure, MediaTek is the No. 2 vendor of mobile system-on-chip products by revenue (and Intel's share is negligible), but from the investment level Intel has been committing to this over the last several years and from the features found in Intel's recently announced XMM 7260 LTE-Advanced solution, it's clear that Intel is the only "real" competitor to Qualcomm at the high end of the modem space today. This is a long-term advantage that cannot be ignored as smartphones, at the end of the day, live and die by the quality and features of the modem.
Modems are the best way to differentiate
It seems that just about anybody can build a competent application processor – just license stock ARM Holdings CPU IP, use either ARM/Imagination Technologies graphics IP, and then build up the various IP blocks (imaging, video, camera, etc.) and – presto! – you have an applications processor. However, for this product to have value inside of the much more lucrative smartphone market (which is, again, driven by the modem), it needs to have a top-notch integrated modem (or, at the very high end of the market, a platform paired with a top-notch discrete modem).
This is where Intel and Qualcomm stand alone. While Broadcom (NASDAQ: BRCM ) has announced that it plans to sample a category 6 LTE-Advanced modem during the middle of 2013, Intel claims that devices with its own category 6 LTE-Advanced modem will be on the shelves by Q2 2014. Qualcomm, too, has been sampling its next generation 20-nanometer MDM9x35 since the beginning of the year and plans to have availability during the second half of the year (iPhone 6, anyone?). Interestingly enough, Intel may actually beat Qualcomm to market with a category 6 LTE-Advanced modem.
Intel and Qualcomm well positioned
Nobody – not Broadcom, MediaTek, Marvell, ST-Ericsson, or NVIDIA – has modem capabilities that today match Qualcomm/Intel, which is a long-term positive for Intel once it ports its modem IP to its own manufacturing technology and integrates it into system-on-chip products. This, in this Fool's view, means that long-term Intel and Qualcomm will largely control the smartphone system-on-chip market.
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