While rivals such as Nvidia (
NVDA
) and Broadcom (
BRCM
) are looking to make deeper inroads into the LTE space, Qualcomm (
QCOM
) is trying to defend its early lead with the addition of new
functionalities to its already widely deployed LTE
chipsets.
The dominant mobile chipset maker introduced a new chipset
solution, dubbed the RF360 Front End Solution, which it claims will
help solve the problem of LTE fragmentation that handset makers
including Apple (
AAPL
) face worldwide. As carriers around the world transition to
the higher-speed 4G LTE standard, they are doing so on the
back of about 40 different LTE bands that are based on a variety of
spectrum frequencies. This has made it imperative that handset
makers come up with a different models of the same phone for
different regions in order to support the multitude of LTE
networks that have sprung up globally. With the RF360,
Qualcomm hopes to solve the problem and emerge as the go-to vendor
for all the handset manufacturers that do not want to grapple with
the logistical complexities of selling multiple variants of the
same phone globally.
See our complete analysis for Qualcomm stock
here
Threat to Qualcomm from LTE transition
Strong demand for smartphones is helping the cellular baseband
market grow by impressive rates every year. Last year, the baseband
market grew by a strong 18% y-o-y to reach about $18 billion.
Qualcomm, which dominates the market with more than 50% market
share, has benefited hugely from this trend. But the
rapidly growing mobile device market has attracted the attention of
a diverse set of semiconductor manufacturers who are all vying for
a greater chunk of the high-growth, high-margin business in the
coming years. This month alone, both Nvidia and Broadcom achieved
significant milestones in their LTE plans. Nvidia announced
its first LTE-integrated app processor, the Tegra 4i, and Broadcom
introduced its first LTE baseband chip in the market.
The reason why LTE is important for chipset makers is that many
carriers around the world are transitioning to this high-speed 4G
technology. As a result, among the various technologies that
are driving the baseband market currently, LTE is seeing the
highest growth. The ongoing transition to 4G LTE in many
developed markets, to be followed by the emerging markets such as
China and India, could threaten Qualcomm's dominance in the coming
years as rivals' LTE chipsets become more mature and see wider
usage.
First mover's advantage with Qualcomm
However, the semiconductor giant has taken an early lead in the
rapidly growing LTE baseband market. Of the 47 million
LTE-capable chipsets that were shipped last year, Qualcomm
accounted for nearly 86% of the market. This big lead is testament
to the company's superiority in 3G/4G connectivity solutions that
helped it come to market first with LTEE designs. As a result,
while competitors are only now bringing their first LTE basebands
to market, Qualcomm's chipsets are in their third-generation
already. It is this maturity which the semiconductor giant brings
to the table that caused Apple to shift its baseband supplier from
Infineon (now acquired by Intel) to Qualcomm back in 2011 when it
launched the iPhone 4S.
So while we believe that the LTE transition gives the new
entrants their best chance at competing more effectively with the
market leader, Qualcomm's smart anticipation of the LTE demand and
its proactive moves to get its basebands LTE-compatible as
well as integrate them on its Snapdragon app processors much before
the rest of the market have helped it ride the initial demand and
should help it hold down the fort in the near term as well. The
launch of the new RF360 solution further solidifies Qualcomm's
stature in the market and its ability to lead with first-to-market
innovative solutions.
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