Mobile chipset manufacturer Qualcomm (
faces a new challenge from mighty Intel (
), which recently expanded its mobile processor capacity by
acquiring cellular baseband supplier Infineon for $1.4 billion in
cash. Qualcomm also competes with Broadcom (
), Freescale, Marvell (
), MediaTek and Texas Instruments (
Cellular basebands are chipsets that handle voice and data
communication in wireless devices. Infineon's customers include
) and other mobile phone manufacturers.
We don't see Intel posing a significant threat to Qualcomm in
the short term. However, there could be an 8% downside to
our $48 stock price estimate for Qualcomm
if Intel manages to snatch a significant share of the mobile
chipset market by the end of the Trefis forecast period. Our
analysis follows below.
Potential downside to Qualcomm's stock
Qualcomm dominates the CDMA mobile phone chipset market with a
market share of 69% as of last year. Due to increasing competition
from MediaTek and Texas Instruments, we expect Qualcomm's share to
decline over the next few years, reaching 60% by the end of the
Trefis forecast period.
You can drag the trend-line in the chart below to create your
own CDMA share forecast for Qualcomm and see how it impacts the
company's stock price.
Our estimate excludes the long-term challenge posed by the
Intel/Infineon combination. There could be a downside of 8% to the
$48 Trefis price estimate for Qualcomm's stock
if its CDMA market share declines to 50% by 2016, instead of the
60% that we currently forecast.
Integrated chipsets and mobile phones
Qualcomm's Snapdragon platform combines a cellular baseband with
an application processor. Snapdragon customers include mobile phone
companies like Nokia (
), Motorola (
), Samsung and LG, which favor integrated chipsets because they
simplify the phone manufacturing process.
The Infineon acquisition allows Intel to integrate its Atom
mobile application processor with Infineon's cellular baseband.
This will take time. As a result, we don't think the Intel/Infineon
combination poses an immediate threat to Qualcomm's Snapdragon
Eyes on Apple
Apple currently buys PC processors from Intel and iPhone
chipsets from Infineon. After the Intel-Infineon deal, we think
Apple may want to diversify its supplier base by shifting its
mobile chipset business to another supplier. At least in the short
term, this could be a net positive for Qualcomm.
You can see
the complete $48 Trefis Price estimate for
Qualcomm's stock here.