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Is Qualcomm Past its Peak 5G Baseband Share?

by Sravan Kundojjala | Jun 25, 2021

Qualcomm, the baseband market share leader, historically navigated network technology transitions well and dominated 3G and 4G markets. The company’s dominance continued in 5G as well. Qualcomm’s financial strength, early R&D investments, strong relationships with infrastructure vendors, network operators and handset manufacturers, complete systems knowledge and active participation in standard bodies such as 3GPP all give Qualcomm a unique advantage to sense market trends early and in turn enjoy an early mover advantage.

Qualcomm unquestionably benefited from its early 4G and 5G investments and played a pivotal role in fast-forwarding 4G and 5G timelines. Qualcomm accelerated the 5G timeline by one year, thanks to its massive effort to pull together the industry ecosystem. Unsurprisingly, Qualcomm’s efforts showed up strongly in its financial results. For example, the company enjoyed a 28 percent average annual growth rate in its semiconductor business between 2010 and 2014 on the strength of its dominant 4G market position. During this period, Qualcomm’s baseband shipments more than doubled. Similarly, Qualcomm clocked a 34 percent year-on-year revenue growth in CY 2020 on the back of its 5G momentum. Qualcomm will continue this momentum well into 2021 and 2022 as the ongoing 4G to 5G transition will significantly impact.

Thanks to its early mover advantage, Qualcomm typically enjoys the premium on its products. For example, during the 4G transition, Qualcomm captured 85 percent of all 4G basebands shipped between 2010 and 2014. Qualcomm’s success story continued in 5G, too, as the company captured 58 percent of all 5G basebands shipped between 2019 and 2020.

Our latest research shows that Qualcomm’s 5G shipment share reached 70 percent in Q1 2021. Qualcomm captured almost 95 percent share in 4G basebands at its peak. However, the company is unlikely to grow its 5G share to 90 percent given the intense competition from MediaTek and Samsung. Soon Apple will also join the fray.

We think Qualcomm’s 5G baseband share has peaked but the company will continue to post massive growth in terms of absolute unit growth.

What does this mean for Qualcomm?

  • Our view is that the 5G transition is still in the early stages and that Qualcomm has enough room to grow its 5G shipments and revenue
  • Qualcomm continues to maintain its 1.5x revenue impact in 5G compared to 4G, driven by the company’s near 100 percent RF front-end attach ratio
  • Will the company continue to enjoy the premium? Qualcomm is well-positioned to capture premier tier 5G design-wins in the near term, thanks to HiSilicon’s forced exit. Qualcomm’s customers, including Apple, Samsung, Xiaomi, Oppo and Vivo will capture HiSilicon’s Mate and P premier tier share in 2021 and 2022.
  • While Qualcomm may struggle to increase its market share further significantly, the company has enough room for unit and revenue growth as 3GPP release 16 and 17 will open up new opportunities beyond smartphones.
  • Qualcomm is on a mission to diversify its revenue streams beyond smartphones. Qualcomm’s investments in RFFE, automotive, industrial IoT, Windows PCs, infrastructure SoCs, XR, edge AI, audio and other areas will help. As a result, we expect Qualcomm will register $8-$9 billion in revenue from outside handset chips in CY 2021.
  • We wouldn’t be surprised if Qualcomm gets more revenue from non-handsets than from handsets in 3-5 years. Mergers and acquisitions will help. The company will likely expand its IoT offerings with acquisitions. Underpinning all this growth will be Qualcomm’s 5G modem technology. Qualcomm may go places, but modem technology will continue to be the core of its strategy, whether it is a smartphone or a car or even a factory.

Please let us know if you would like to explore this topic in detail.

Sravan Kundojjala

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