Pocket Nightcap: Qualcomm is set to beat up Intel… and that’s a problem
Intel and Qualcomm are brand names that saturate almost every little thing in the tech world. They make the transistors that run our world from screen to screen, app to app and from this second to next year. Their processors and modems connect us from point A to point Z. And the patent portfolios backing them up span long, wide cabinets that could fill the Vatican.
Their dominance in the tech space has been the subject of big money antitrust suits, but no one has admitted that they can live without a chip from the company with the quirky jingle or the company pushing 5G down our throats.
The thing is, they’re both set on a collision course towards competing in each other’s stronger fields: Qualcomm is reportedly working on higher-wattage CPUs as part of a complete systems-on-a-chip strategy for laptops and tablets while Intel has been gaining steam on 5G. Those two inflection points, in my opinion, will be key to determining how badly Intel will suffer over the next few years.
In traditional computing, Intel is facing fresh pressure from AMD with competitive six- and eight-core Ryzen processors showing up the company’s recent refinements to its Kaby Lake design and its first crack at six cores. Its name was recently tarnished by tangent to the MacBook Pro’s poorly-tuned throttling behaviors when handling the latest Core i7 and i9 processors. Furthermore, there’s a glimmer of promise coming from Qualcomm’s recent Windows on ARM initiative, bringing Snapdragon power and cellular connectivity to laptops and convertible tablets while also delivering on battery life times of more than 18 hours. That last bit is especially key for customers these days who are used to forgetting their bulky chargers.
On the other hand, Intel isn’t faring well with one of its biggest customers: Apple. It was recently reported that the iPhone maker rejected Intel’s 5G modems as part of its components mix for the 2020 models — traditional second-place laggard MediaTek may take its place. The company had been working on turning around its failing modem business for next-generation network deployment, but it will have to struggle finding a sustainable diversion. In addition to the MacBook Pro snafu, which I deem not at all Intel’s fault, there’s also word that Intel Core processors could be phased out of MacBooks also beginning in 2020. Apple is said to be working on its own processor design.
Meantime, Qualcomm has just recently fended off an acquisition from competitor Broadcom and looks to have a deeper foothold in the mobile technologies market. It is facing anti-competition allegations from both the FTC and Apple at this point which has led to several legal battles down the line that have covered key cellphone features like power management chips and CDMA network access. The semiconductor firm is confident, though, that with this litigation and posturing, it will come to reconciliation with one of its biggest customers soon enough.
All of this makes for the case of an ascendant Qualcomm and a declining Intel if they’re placed on a single axis of comparison. Now, I’m not in the business of predicting which way the fates of either company will actually go, but if there is one company that is proving itself as a cross-industry envelope pusher time after time, it has to be Qualcomm. And as it is, I’m worried.
The concentration of innovation and the crackdown and lockdown of revenues as instituted by Qualcomm has contributed to climbing chip purchase costs and tech licensing fees and all of that gets passed down to the consumer… duh, we’re in a capitalist economy, you reap what you sow. However, with that competitive grip on the modem market being challenged by Apple, some of its clients are becoming more engaged with competitors like Samsung and MediaTek. That’s left the company playing catch-up by offering something resembling a standard essentials patent package, but not quite.
QCOM stock remains mired in a chronic nowhere zone for the past several years, last hitting a peak of nearly $81 per share in 2014. It has since clawed as low as $44, but has been stubbornly stuck between $50 and $70 through this year. The corporate structure has gone through upheaval in defense against Broadcom’s takeover bid — which would have valued the company in the triple digits per share — to protect its wide-ranging research and development departments. When the new board came back to investors with a move-on strategy consisting of workforce dieting, many were skeptical that it would generate appreciable returns.
Qualcomm might be dominant, but in the open sandbox of reality, it is not actually ascendant.
The spread to new verticals for its applications processing business is important for this San Diego giant, but real sales have historically paled in contrast with what licensure harvested. What I think is more important at this point is if Qualcomm can’t satisfy profit forecasts for a prolonged basis, we’ll be stuck with a company that has all the intellectual property rights to block out competition on past technologies with less willingness and agility to branch out into new, different potential revenue streams through experimentation.
Sure, it’s 5G all the way, baby: one standard to rule them all. But boy, is it going to suck if Qualcomm isn’t able to close its acquisition of sound chip maker NXP — which is being held hostage in China perhaps as part of a wider trade position against an adversarial United States — or look to other acquisitions to bolster its mind base. Add in more job cuts, more non-disclosure or even non-compete agreements and we’re left with an ideas engine that won’t run.
Honestly, at this point, the more competition that can bubble up now and take on what Qualcomm has traditionally dominated, the better — that includes Intel. But I also think that if Qualcomm can chase mad tail and perhaps offer alternatives to divergent products and place as a strong runner-up, I’d think it would sustain the innovation economy from which we all benefit.
Minds don’t have to think alike to be great. They just need a little money, a little drive and a lot of popularity.
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