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Andy Rooney once famously said, "Anything makes the price of everything go up. Nothing makes the price of anything go down."
That's apparently not true for Qualcomm. The recent Chinese deal has everyone thinking there is inexorable downward pressure on royalties that dim future prospects. I have a contrarian view (no surprise there). 2016 is a year of design wins and prepping the next round of IP, on 5G, NB-IOT, and other future technologies that could command higher royalty percentages if Qualcomm does its job.
The idea to separate the IP business from the silicon business of QCOM was horrible. The synergy has always been greater than the sum of the parts. Short term, revenue is going to be tougher in a flat mobile device market under royalty pressure - but I think that's a rear-view mirror perspective. The prospects (at the risk of sounding like the POTUS when there are clearly concerns) look better on a 3 to 5 year horizon as new IP takes hold.
Opinions? Optimistic, pessimistic, cautious?
Disclaimer: I don't own QCOM or anything in the semi, computer, or mobile sector, and haven't for years since I write about these firms.
I am not that familiar with this issue but I have doubts that Qualcomm will be able to do as good with royalties in the next round of standard upgrades as they did in the previous one. As I understand Qualcomm managed to push their IP into various standards/tech when the total mobile market was relatively small. The stakes were lower and perhaps the major players did not pay that much attention. It's very different now. I think companies like Apple, Intel, Samsung, Verizon etc. will make sure that not one single company benefits much more than the others.
I am not that familiar with this issue but I have doubts that Qualcomm will be able to do as good with royalties in the next round of standard upgrades as they did in the previous one. As I understand Qualcomm managed to push their IP into various standards/tech when the total mobile market was relatively small. The stakes were lower and perhaps the major players did not pay that much attention. It's very different now. I think companies like Apple, Intel, Samsung, Verizon etc. will make sure that not one single company benefits much more than the others.
Agreed, I also doubt China will allow it either, from QCOM, Intel, or any other US technology company.
At the Industry Strategy Symposium this week the common theme amongst the China presentations was “joint partnerships”. Hopefully you get the picture here, semiconductor and electronics are part of a very aggressive national charter in China and it is not just economic.
The unspoken truth is that semiconductors and electronics are critical to National Security and nobody knows this better than China. And as we all know security starts with silicon so if you want to do business in China you had better get very comfortable with joint ventures.
Qualcomm management did good thing by not separating QCT and QTL. Both can jointly produce more than being separate. It's more required now because standard patents licensing is more regulated now than earlier. There were several litigations by smartphone companies across the world. So, now the revenue stream from those licensing will not be arbitrary putting up a pressure on revenue from licensing.
Qualcomm is trying hard to crack server and other newer devices market, so will have to watch.
