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Why Did Qualcomm Inc. Kill Its New Smart TV Chip?

By Chris Neiger – Feb 18, 2014 at 10:00AM

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Qualcomm's Snapdragon 802 won't see the light of day, and a lack of smart TV demand is to blame.

Sometimes things just don't work out according to plan. Qualcomm (QCOM -1.88%) recently announced it's scrapping its new Snapdragon 802 chip designed specifically for smart TVs. The move is a bit strange considering it takes years to develop a new chip, but with demand for smart TVs still fairly low it's the company's best option.

A less-educated screen
The Snapdragon 802 was introduced in January at the Consumer Electronics Show and boasted a 1.8GHz quad-core processor, a 4K-capable Adreno 330 graphics processor, and integrated Wi-Fi. The 802 was scheduled for sampling by TV makers early this year and was to start shipping in the second half of 2014.

But now Qualcomm is saying that demand for smart TVs isn't strong enough to warrant building the chips. In a press release the company said it "has decided not to commercialize the recently announced Snapdragon 802 processor as the overall demand for processors uniquely designed for smart TVs has proven to be smaller than anticipated."

While it's surprising the company is dropping the chip so quickly, the lack of smart TV demand shouldn't be.

As far back as 2012, The NPD Group released a report saying that users mainly use Internet-connected TVs to stream video (surprise!) rather than to surf the web, shop or post to social media. The report went on to say that the set-top boxes, Blu-Ray players, gaming consoles and other devices are hurting smart TV adoption. This has likely been even more pronounced after Google introduced its Chromecast stick that can send Internet content to an HDTV for just $35.

A separate report by IHS back in October painted a similar picture. It said that nearly 75% of U.S. TV consumers weren't considering smart TV purchase within the next 12 months. The report said that "[n]either smart TV nor 3-D TV has been a major motivation for consumer television purchases during the last two years." And it seems Qualcomm's latest decision shows not much has changed over the past few months.

Foolish thoughts
Even though Qualcomm is dropping the Snapdragon 802, it could still enter the smart TV market if demand turns around. The chipmaker's 800 and 805 chips, currently in smartphones and tablets, could be adapted for televisions. The high-end Snapdragon line is more than capable of handling smart TV features.

I think it's wise the company isn't spending any more time on a TV-specific chip considering consumers seem more than satisfied with connecting their TVs to the Internet in other ways. With prices for Chromecast, Roku and Apple TV so low, relative to new smart TV prices, there's no reason for consumers to change their ways -- which means there's no reason for Qualcomm to release the new chip.

Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google and Qualcomm. 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.

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