Qualcomm’s Evolving Story

When most people think of Qualcomm, they tend to think of modems and cellular radio technology. After all, that is how the company began and it still forms a large part of their approximately $25 billion in fiscal 2013 revenues.

But the company does much more. They have been successfully targeting Intel and other CPU/GPU companies with their Snapdragon line of mobile application processors and Adreno graphics engines for several years now. They’re even starting to make efforts in the sometimes murky world of chip branding, thanks to its clever Snapdragon marketing campaign. Plus, like most large, successful silicon companies, Qualcomm is increasingly focused on software. From radio drivers and firmware to DSP (digital signal processing) algorithms and auto infotainment systems, engineers at Qualcomm shipped an impressive 3.3 billion lines of code in 2013.

For years, much of Qualcomm’s financial success was due to a very strong set of core mobile radio-based patents that it vigorously defended as the need arose. Royalties from these patents provided the cash necessary for the company’s aggressive expansion into new types of markets and opportunities, particularly with the explosion of the smartphone market over the last few years.

But with an expected slowdown in smartphone growth rates, rapid declines in smartphone ASPs (average selling prices) and increased competition not only from other silicon makers but the increasingly “vertical-ized” supply chains of mobile phone makers themselves, the question arises as to where the next era of growth could come from, or if it comes at all. The company recently changed management—with long-time Qualcomm veteran Steve Mollenkopf taking the CEO reins from Paul Jacobs, who will continue as Executive Chairman—so many are expecting to see the company’s strategy begin to slowly evolve to address some of these issues.

While there are no easy answers, to the company’s credit, they’ve extended themselves across a wide range of potential new opportunities, from their virtual reality Vuforia initiative to the Qualcomm Mirasol display-driven Toq smart watch to their Gimbal context aware platform, which among other things, can leverage digital beacon technology. Some of the most intriguing options revolve around the development of software algorithms that can interpret data generated by the wide variety of sensors and inputs expected to make it into future generations of both smartphones and wearables. Astutely dubbed a “digital sixth sense,” this software promises to bring a level of situational relevance and intelligence to devices that should make them much “smarter” smartphones and smart wearables. Details on exactly how this capability will be built into future mobile platforms is still a bit unclear—especially because it would seem to demand integration into mobile operating systems, which Qualcomm does not control—but the concept is clearly appealing.

Qualcomm has also leveraged its industry leadership position to assert itself in some important industry standard discussions, most notably its open-source AllJoyn initiative to help connect at least some of the “internet of things” (IOT). AllJoyn is an important initiative with the potential to help avoid the “Tower of Babel”-type challenges currently facing the connected digital home and the wider IOT marketplace because it helps define the types of messages and means by which they can be communicated across different devices. To date, Qualcomm has done a good job of evangelizing the standard, but it’s going to take the addition of several more big industry players to really get it off the ground. Given the importance and necessity of solving this problem—for the sake of the entire IOT industry and opportunity—let’s hope they’re successful.

In the short term, Qualcomm can continue to leverage the expected growth in the mobile market, but more importantly, longer term, the company has placed a number of interesting bets that look to position it well for the future.