News & Analysis

Exploring Qualcomm’s U-Turn

The US semiconductor company seemed to have surged ahead of competition with top end chipsets until they did an about turn to align with entry-level devices

Anyone who’s been following the smartphone journeys of Android devices would have heard of Qualcomm and MediaTek – the two chipset makers who power pretty much every handheld device that humankind has come to handle. And the Snapdragon chipsets have made Qualcomm into some kind of a legend in the space. 

Powering a large chunk of Samsung’s devices as well as the flagships of most Chinese brands – from Xiaomi to Oppo and OnePlus and everything in between, the US-based semiconductor sold its wares at a 15% premium over its closest Taiwanese rival MediaTek. A few years back, they used the 5G wave to zoom ahead and dominate the mid-to-high-end devices. 

And just when we thought that Qualcomm had finally differentiated itself in the market, came a report that quite literally caught us napping. It quoted Qualcomm India and SAARC head Rajen Vagadia to suggest that the company was working with OEMs to reduce prices of entry-level 5G handsets to below Rs.8,000. 

The shift from premium to entry-level chipsets

Why would a brand that’s known to sell chipsets to flagship offerings want to move to the so-called cattle class, as Shashi Tharoor once described airline seating in India. The answer is quite obvious really. Demand is down, model launches are far and few, shipments have halved compared to the pre-pandemic period. Apple has its own chipset now! 

Where does all of this leave Qualcomm? Between a rock and a hard place. They either choose to be rigid with their offerings or seek an avenue where devices sell thick and fast compared to the ones they were in. Remember, India has 650 million users, which means an equal number could end up owning a device in the none-too-distant future. Hence, the Rs.8000 target. 

Tough to explain from a global perspective

At a global level, Qualcomm may have long decided to find its mojo elsewhere, knowing full well that both Apple and Google design their own chipsets, which leaves them with just Samsung and a whole bunch of Chinese upstarts (or do we call them smart mimics now?). With the Korean giant, Qualcomm is safe as they’re not using in-house Exynos in flagship offerings. 

The company acquired several others to strengthen their positions elsewhere. Cellwize and Augmented Pixels did their bit for their smartphone positioning while Clair AIR targeted the AR / VR business but it was Qualcomm’s acquisition of Nuvia in early 2021 that laid the groundwork to strengthen its core computing base just as PA Semi did for Apple in 2008. 

From smartphones into the lucrative EV space

Just so that you get the picture, PA Semi gave Apple the expertise to build the A-series chips and now the M-series ones, marking the arrival of ARM-based processors. Given their lower power consumption and reduced heat generation and higher compute power compared to x86 processors. Now, Qualcomm could reap similar gains with its Nuvia acquisition. 

For starters, they could reduce the gap between themselves and Apple’s A-series processors and bring back the considerable distance with the MediaTek ones. By getting its act together on the faster and powerful processors, Qualcomm could just be the brand waiting to power one of the fastest growing markets – automobiles, specifically electric vehicles. 

The company already has a comprehensive solution for automakers called the Snapdragon Digital Chassis that combines safety, connectivity, and customizable entertainment. It uses the basic schema of smartphones and gets them into automobiles as the car becomes more of a mobile server in the future. And Qualcomm appears to be at the right place at the right time. 

So, why shift a few gears down in India?

Have seen the future, one is piqued by their decisions around their immediate future, especially in the Indian context. Smartphone buyers aren’t as clued in about chipsets in India, more so in the mid to lower segment. Maybe, Qualcomm just wants to play the numbers game and beat its arch-rival which has in recent times been providing chipsets to the flagships. 

A look at the numbers defies this logic though. Qualcomm makes more than double MediaTek’s revenues – $44 billion versus $18 billion. In India, these numbers aren’t as skewed as both make chipsets worth a $1 billion each for smartphones. Their market share stands at 47% for MediaTek and 25% for Qualcomm, a reversal from the pre-pandemic days. 

Given this shift, it is quite clear that Qualcomm wants to even things out, even at the risk of taking on a rival at the bottom of the pyramid, more so when research is suggesting that Indian smartphone users are also moving into mid-tier acquisitions. As we mentioned earlier, a 500 million market must be lucrative enough for Qualcomm as for any other manufacturer. 

Of course, there could be one small aspect that’s gone unnoticed. India’s definitive move towards making the country a chipmaker hub. The government introduced a second PLI scheme for hardware and the decision on the Vedanta-Foxconn chip making facility. Why would Qualcomm not want a share of this global pie? Maybe, the Rs. 8,000 smartphone target would give them the brownie points to seek more in the future as India’s narrative as the digital transformation hub grows bigger. 

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