This post is a summary of Qualcomm’s current year events which is changing its directions and overall health. We shall see the 7 Reasons Why Qualcomm Is Having A Hard Time in 2018.
Table of Contents
1. Outrun by Huawei in 7nm chip race
Recently the world’s first 7nm mobile processor was proudly announced by Huawei for its flagship smartphone line-up. On the other hand, there is very little information about the Qualcomm Snapdragon 855 processor’s arrival which is to be built on the 7nm process node. Further, it is still unclear whether the processor will carry a 5G baseband.
2. Bad Revenue
The revenue for 2017 was 22 billion USD in comparison to the 2016’s 23.5 billion USD. The decrease in the revenue was primarily from the decreased licensing revenues. It was primarily due to the decrease in licensing revenues of $962 million related to the BlackBerry arbitration and a $103 million decrease in revenues of one of its nonreportable segments. All of the below reasons has already affected the financial health of the company.
3. Failed NXP Acquisition
NXP’s acquisition by the San Diego-based Qualcomm turned into a turmoil with full of twists and turns. NXP’s HQ is located in Europe which mandates the acquisition deal to take prior approval from the General Administration of Market Supervision authority. Qualcomm’s acquisition of NXP had been tossing for more than a year. However, the $44 billion acquisition deal was called-off as it went out-of-control.
In addition, President Donald Trump forced the acquisition of the largest technology company in history by administrative orders for reasons of national security.
4. Lost The Apple
In 2011, it was the beginning of Qualcomm and Apple Honeymoon. It was in that year that the evolution of 3G networks to 4G gradually began, and the demand for mobile Internet began to appear. The iPhone for the global market needs a baseband chip that can be compatible with the entire frequency band of the whole network to meet the needs of different operators in different markets, and this is where Qualcomm came in.
Every iPhone after the iPhone 4s may use different flash memory and screens, but the baseband chips only come from Qualcomm. Qualcomm would charge patent licensing fees as per its business model which has been controversial in recent years. The more innovations Apple has at present, the higher the patent fees that Qualcomm has no reason to collect, and the result is the increase in innovation costs. Such a description may be the crux of Apple’s dissatisfaction with Qualcomm. Now, Apple would source the baseband chips from Intel, as Apple and Qualcomm have already parted ways.
5. Falling Patent Licensing Business Revenue
The patent litigation and anti-litigation case between Apple and Qualcomm affected the Qualcomm’s business already. Since Qualcomm’s patent license is charged according to the number of devices, Apple’s current patent fees owed by Qualcomm may range from $2.5 billion to $4.5 billion. This is equivalent to one-fifth of Qualcomm’s annual revenue.
Apple has long claimed that Qualcomm uses the basic patents of its modern smartphone communication method to obtain unfair high patent fees and force Apple to purchase Qualcomm chips.
6. Server Division Lay-Offs
In June, Qualcomm’s data center chip division laid-off about 280 employees. Qualcomm invested heavily and entered the server market. Now it discarded the expenses and to restructure the financials for shareholders.
Qualcomm evaluated the future opportunities of the data center business and believes that it takes too long to occupy a place in the server chip market. The main goal of Qualcomm’s server chip division is now to provide chips to cloud computing centers and Chinese customers such as Alibaba, Tencent, and Baidu.
7. Incurring Break-up Costs
Due to the inability to pass the anti-monopoly approval of the Chinese Ministry of Commerce, Qualcomm had to give up its $44 billion acquisition of NXP Semiconductors. Qualcomm not only missed this opportunity to expand its business scope, reshape the industry but also suffered heavy economic losses and paid NXP up to $2 billion in liquidated damages.
In addition, the US chipmaker Qualcomm asked the second Supreme Court of Europe to cancel the 997 million euro ($1.2 billion) fine imposed by the EU antitrust agency. According to the documents released by the European Commission’s official daily newspaper, Qualcomm believes that there are many procedural and legal problems with the EU’s anti-monopoly agency’s fines, so the company appealed to the General Court in Luxembourg.
TheInsightrr would like to conclude this post on a positive note. Every cloud has a silver lining. We are yet to see Qualcomm’s next-generation flagship processor, the Snapdragon 855 processor which has already begun mass production. Further, the X50 Modem is going to be a promising one for the 5G era. We expect a speedy recovery and wish good luck for future.
DC works as a technology analyst in a research and advisory firm specializing in automotive, energy, electronics, and semiconductors domain. When he's not working, he loves gaming on his modest pc build, loves sci-fi films, and big pop culture geek!