), the largest mobile chipset developer globally, is expected to
gain significantly in China over the near term. China Mobile, the
leading wireless operator in China, has decided to sell five-mode
4G LTE (long-Term Evolution) handsets only from June 2014.
We expect Qualcomm will benefit the most from this decision as
the company has the most powerful portfolio of five-mode LTE
chipsets developed on its state-of-the-art baseband technology.
The five-mode standard includes LTE, FDD-LTE, TD-SCDMA, WCDMA and
China Mobile is the largest mobile operator in the world in
terms of subscriber count. At the end of Feb 2014, the company
had around 775.6 million wireless subscribers. During the first
two months of 2014, it added 1.43 million LTE subscribers.
Additionally, China Unicomand China Telecom have also started
LTE services. We believe the significant growth of 4G LTE
networks in China will boost royalty revenues of Qualcomm as more
LTE enabled handset will enter the Chinese market.
Qualcomm has more than 250 royalty bearing licensees
worldwide. Additionally, the company has over 90 single-mode
OFDMA licensees.The company also launched its innovative RF360
Front End Solutions. This new technology will solve the problem
of LTE fragmentation faced by most of the large handset
manufacturers. Currently, Qualcomm carries a Zacks Rank #2
However, a major concern for Qualcomm is the regulatory
uncertainties in China. The company is facing an anti-monopoly
investigation by the National Development and Reform Commission
(NDRC), the regulatory authority of China. The company stated
that it isn't aware of any activity that violates the
anti-monopoly law in China and will continue to cooperate with
NDRC. The investigation is likely to impede Qualcomm's growth in
Moreover, aggressive competition in the mobile phone chipset
market may hurt Qualcomm's profits going forward. The company is
facing severe competitive threat from its closest rival,
), which has started shipment of its first multi-mode LTE
Competition is likely to emanate from formidable rivals like
). The company also faces competitive threat from low-cost chip
suppliers like Mediatek of Taiwan, VIA Technologies and
Spreadtrum Communicationsof China.
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