Qualcomm (NASDAQ: QCOM ) is one of the world's leading semiconductor companies, and certainly the leading wireless chip company. As one of the few ARM (NASDAQ: ARMH ) licensees that has been able to make good money participating in the mobile applications processor market, Qualcomm has continued to expand its moat in all things mobile silicon.
Qualcomm owns the entire platform
While some companies have been successful in investing in a handful of the subsystems found in a mobile processor, Qualcomm has invested heavily to have strong IP across the board. Further, not only are Qualcomm's individual building-blocks so robust, but its ability to integrate them together and to spin variant after variant for different market segments is a real competitive advantage.
Keep in mind, though, that it's not just about the apps processor. Qualcomm has far-and-away the best cellular technology (which is the heart of any mobile processor), and at the same time has been quite rapidly improving its connectivity solutions. Do note, though, that Broadcom (NASDAQ: BRCM ) is widely acknowledged as the leader in high end stand-alone connectivity combo chips and will likely very vigorously defend its share there.
As an added bonus, Qualcomm is also making a serious pass at owning the RF front end with its RF360 solution.
Illustrating the point
Let's examine a recent teardown of the newly released Samsung (NASDAQOTH: SSNLF ) Galaxy S5 to illustrate this point. According to Chipworks, the Galaxy S5 sports the following Qualcomm chips:
- WTR1625L RF transceiver
- WTR1620 receive-only companion chip
- PMC8974 power management IC
- WCD9320 audio codec
- QFE1100 envelope tracking power amplifier
- Snapdragon 801 (MSM8974)
This is a lot of silicon content that goes well beyond simply winning the applications processor/baseband socket. One would be very hard pressed today to find a single chipmaker that could offer this entire package at these performance/feature levels today.
All of this enabled by large, focused R&D
While it's easy to point to the results, it's important to understand what drives these results. Qualcomm appears to spend in excess of $3 billion per year in mobile chip related R&D. Not too many other companies can afford this level of spending without a fairly near-term return, which is why the market ultimately cannot support more than a few competitors.
Regardless of which company ends up being the No. 2 to Qualcomm, it seems as though Qualcomm has solidified its spot as the leader in this space and has a wide and deep technological and economic moat to defend that position.
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