With the precipitous rise of global smartphone adoption, the applications processor is one of the most coveted component spots to score. Indeed, the smartphone processor market jumped 61% during the first half of the year to a whopping $5.5 billion, according to a recent Strategy Analytics report. Let's see who's who in the smartphone processor market.
And the winner is...
Qualcomm (NASDAQ:QCOM) continued its domination of the smartphone processor market -- a key reason why I own shares myself. The company led the way in both units and revenue during the first half of the year, claiming a 48% revenue share.
Analyst Sravan Kundojjala said Qualcomm's high-end LTE-equipped Snapdragon chips have gained "strong traction" with design wins at tier-one OEMs, and its advantages in LTE technology has helped the company stay ahead of the curve. Among those wins is Samsung's popular Galaxy S3, one of the top-selling Google (NASDAQ:GOOGL) Android devices in the market today, which carries a Snapdragon in some models.
A separate Strategy Analytics release earlier in the year also pegged Qualcomm's baseband market share at 45%, meaning the company is the leader in both processors and basebands. Its chip division remains the growth driver, with its CDMA technologies segment growing 31% last quarter to $2.9 billion, while the licensing business grew 27% to $1.6 billion.
The other top five spots went to Samsung, MediaTek, Broadcom (UNKNOWN:BRCM.DL), and Texas Instruments (NASDAQ:TXN). Broadcom has grown thanks to its focus on low-end Android phones from Samsung. Coming in as the No. 3 player, MediaTek put up 13-fold growth during the first half, attributable to the company's focus on the low-end Chinese smartphone market.
Even though TI scored high on this list, investors can expect it to drop off in the near future as the company is effectively ditching mobile and its OMAP chips are being rolled into its embedded processing division as it gives up on smartphones. It's still proceeding with developing its next-generation OMAP 5 platform, but those chips will be destined for other industrial uses, like in automobiles, and not smartphones.
Chip giant Intel (NASDAQ:INTC) was able to squeeze in with a small 0.2% unit share during the first half with its Medfield Atom processor, built on a 32-nanometer manufacturing process. That's a start for Chipzilla, especially since it hasn't pursued any mainstream domestic wins and is going after other markets, such as the Motorola RAZR i and Orange San Diego in Europe.
You may also notice who's not included on this list of the top five players: NVIDIA (NASDAQ:NVDA). Many investors are banking on the company's Tegra business as a growth driver in coming years, riding on the mobile device boom. CEO Jen-Hsun Huang has also been targeting the low-end Chinese smartphone market with the older dual-core Tegra 2 chip, hoping to tap smartphones that sell for less than 1,000 yuan. That strategy is clearly working wonders for MediaTek, so why hasn't it paid off for NVIDIA?
Instead, NVIDIA has been scoring notable tablet wins, such as in Google's Nexus 7, but it lost out the spot in Amazon.com's (NASDAQ:AMZN) Kindle Fire HD to TI's OMAP 4. Huang acknowledged this on the most recent conference call, and felt that the company's wins would continue to lean more toward tablets rather than phones.
The challenge there is that the tablet market remains dominated by Apple's (NASDAQ:AAPL) iPad and a processor designed in-house, so there's no design win available there. What's left of the tablet market is primarily split between the Nexus 7 and Kindle Fire HD, but Microsoft (NASDAQ:MSFT) Windows 8 is due out later this month. The software giant's Surface tablet also carries a Tegra 3, but the device hasn't launched yet.
One of these days
Both Intel and NVIDIA have been trying to grow in the baseband market, too, with Intel acquiring Infineon's wireless division in 2010 and NVIDIA acquiring Icera in 2011. Next year, NVIDIA plans on shipping a Tegra processor with integrated LTE, codenamed "Grey," after the roadmap was slightly delayed.
Cellular integration has been a critical strength for Qualcomm, one that NVIDIA wants to replicate. Perhaps then the company will be able to crack into the top five in smartphone processors. In the meantime, this is still Qualcomm turf.