Qualcomm (QCOM -0.85%) is well-known for having a dominant position in smartphone-oriented chips. In fact, Strategy Analytics claims that Qualcomm's revenue share of the smartphone applications processor market came in at a whopping 54% during 2013. Interestingly enough, it looks like Qualcomm is leveraging the same kind of low-power, high-performance silicon that it designs for phones in smart watches.

AnandTech tears down the Galaxy Gear Live and the LG G Watch
Tech site AnandTech tore down both Samsung's (NASDAQOTH: SSNLF) Galaxy Gear Live smart watch as well as the LG G Watch. Though it is unclear how well these devices will ultimately sell, particularly as the underlying smart watch market is still unproven, the teardowns did reveal that Qualcomm was a big winner here.

Both the LG G Watch and the Galaxy Gear Live sported a Qualcomm APQ8026 apps processor, which is very similar to the Snapdragon 400 processor found in many smartphones today, sans the integrated cellular modem. This chip comes packed with four ARM (ARMH) Cortex A7 processor cores as well as a low-end variant of Qualcomm's signature Adreno graphics.

The interesting thing here is that unlike the first smart watches, which basically had very weak ARM Cortex M0 microcontroller-type processors, this is similar gear to a modern low-end smartphone. If the market for smart watches grows to be fairly sizable, then companies like Qualcomm that develop very highly integrated, power-efficient processors, should benefit quite handsomely.

Who else benefits? ARM and Taiwan Semiconductor come to mind.
If this market for wearable computing devices really takes off, then semiconductor companies exposed to the design and manufacture of the highly efficient processors required for this market will benefit. Qualcomm seems to have an early lead in delivering the final chip, but ARM seems to be poised to benefit as its CPU IP is likely to be -- as it is in smartphones -- very popular here.

Further, this processor IP is useless unless it can be built, and a company like Taiwan Semiconductor (TSM -1.67%) -- which builds most of Qualcomm's processors (as well as those from much of the ARM ecosystem) -- could also stand to benefit nicely as it could ultimately end up building most of the key chips for this market. Naturally the chip value going into these smart watches is probably going to be lower on a per-unit basis than what goes into a phone or a tablet, but given the right volumes, it could still be very lucrative business.

Foolish bottom line
It's encouraging to see what basically amounts to a full computer stuffed into a wrist-sized device. While in the long-run, chip companies will need more custom tailored parts for these products (especially if they're going to get the battery lives up significantly), it's really interesting to see that smart watches -- should they ultimately prove viable -- will eventually be a first-class citizen within the computing continuum.