Update Qualcomm (QCOM)
Talk is just talk. Even, or maybe that’s “especially,” when it’s from a company’s CEO.
But it can still give investors a sense of where a company thinks it’s headed.
Take, for example, the talk from Qualcomm (QCOM) CEO Paul Jacobs in Hong Kong on November 18.
Jacobs told reporters that Qualcomm hopes to sell a fourth-generation chip based on the TD-LTE standard, China’s home growth cell-phone technology in China in 2010.
The chip will be compatible with all existing 3G standards, which should help Qualcomm sell to China Mobile (CHL), which operates on China’s TD-SCDMA standard.
Jacobs said he expects his company’s fastest revenue growth to come from China in the years through 2013. Analysts expect China’s 3G market to grow to 211 million by 2013 from 30 million in 2008, he said. China now accounts of 23% of Qualcomm’s revenue and is the company’s second largest market after Korea.
Qualcomm already sells 3G chips in China to China Telecom (CDMA-2000) and China Unicom (W-CDMA)
He didn’t provide a forecast, but China now accounts for 23% of Qualcomm’s revenue and is its second-largest market after South Korea.
Qualcomm is already selling chips for 3G services in China based on Code Division Multiple Access 2000 technology to China Telecom (CHA) and Wideband-CDMA technology to China Unicom (CHU).
What else did Jacobs talk about?
The company’s plans to sell chips into an emerging new product category of computer-like mobile phones called “smartbooks.” (At least that’s what the category is called now pending resolution of legal action from a small German company that sells a trademarked product under that name.) Jacobs said Qualcomm is working with 15 manufacturers on 40 new smartbook designs. Taiwan’s HTC has already rolled out one model.
And last, but certainly not least, Jacobs addressed persistent rumors that Qualcomm is in talks with Apple (APPL) for a “world mode” iPhone that would be built around a Qualcomm CDMA/UTMS chip. (For my most recent take on Apple see my post http://jubakpicks.com/2009/11/13/has-apple-blown-it-did-the-company-squander-the-competitive-chance-of-a-lifetime/ )
Yes, the companies are talking, Jacobs said, but, No, he wouldn’t tell reporters what Apple and Qualcomm are talking about. Could be an iPhone. Could be something else.
It’s all just talk. Got to love it. Got to hate it.
Full disclosure: I own shares of Qualcomm in my personal portfolio.
The amount of misleading information here is unfortunate. To wit:
TD-LTE is not the “home-grown” China standard; TD-SCDMA is. And it’s not at all clear if/when China (specifically, China Mobile only) would deploy TD-LTE.
The overwhelming majority of China Mobile’s subscribers utilize GSM, not TD-SCDMA. As a fraction of China Mobile’s subscriber base, the number of TD-SCDMA subscribers is utterly irrelevant. Thus, even if we assume that the TD-SCDMA subscribers will be converted to TD-LTE, the net contribution to Qualcomm’s revenue is a rounding error.
While Qualcomm likely supplies chips for substantially all cdma2000 handsets in China, the number of cdma2000 users in China is dwarfed by the number of GSM users — by an order of magnitude at least. Qualcomm does not supply GSM-only chips, and the company only has a portion of the GSM-WCDMA market. The only operator in China that utilizes WCDMA is China Unicom — the weakest of the three.
Even if Qualcomm derives 23% of its revenue “from China”, it is a virtual certainty that a huge portion of that revenue is derived from re-exported handsets — i.e., not the local market. This is precisely the reason that Korea is Qualcomm’s “largest market”: Because Korean manufacturers supply the bulk of the world’s cdma2000 handsets and a large portion of the WCDMA handsets.
So if the takeaway here is meant to be that Qualcomm is hitching its wagon to the China rocket… I call bunk.
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