) recently announced earnings and highlighted the growth
opportunity in emerging markets as telecom operators adopt 3G
technology.Qualcomm competes with other mobile chipset makers like
Texas Instruments (
), Infineon and Broadcom (
) in the mobile segment.
3G mobile phone technology is based in large part on CDMA2000
and WCDMA protocols and is considered better than the traditional
GSM technology. This 3G technology provides faster internet access,
download speeds and increased network capacity and flexibility. As
telecom operators in emerging markets like China and India continue
to upgrade their networks from 2G to 3G technology, we believe this
is a large growth opportunity of Qualcomm.
If current CDMA penetration rises from an estimate 50% currently
to 85% of all mobile phones by 2016 vs. 77% as we predict, this
chips in about 7% upside to our price estimate of $49.93 price
3G Technology in Emerging Markets
Qualcomm added 14 new Chinese licensees in fiscal year 2010,
bringing the total number of Chinese licensees to 65. In India, the
majority of newly licensed operators plan to launch 3G services
before the 2010 year end. Tata DOCOMO became the first private
Indian operator to launch 3G.
3G Technology Adoption Benefits Qualcomm in Two Ways
- Qualcomm is the market leader in CDMA mobile phone chipset
market with an expected
share of around 66% in 2010
. 3G technology adoption increases the addressable market for
which it sells chipsets. These chipsets are sold to mobile phone
vendors like Nokia, Samsung and LG.
- Qualcomm will earn higher CDMA royalty revenues, since it is
expected to collect an average of around
in 2010 from every CDMA mobile phone sold.
Since 3G is based primarily on CDMA technology, higher 3G sales
will increase the number of CDMA mobile phones sold (the "CDMA
penetration"), which will benefit Qualcomm.
As per the company's guidance for calendar year 2011, we have
revised the CDMA phone penetration to around 56% by 2011 from the
previous expectation of 53%. This rises to around 77% by the end of
Trefis forecast period from the previous expectation of 68%. This
implies that we expect 1.4 billion CDMA mobile phones to be sold
annually by 2016.
However, there could be an upside of 5% to the
$49.93 Trefis price estimate for Qualcomm's
if CDMA penetration increases at an even faster rate to reach 83%
by the end of Trefis forecast period, instead of 77% that we
You can see the complete $49.93 Trefis Price
estimate for Qualcomm stock here