In 2015 Qualcomm stunned the fabless semiconductor world with an unprecedented layoff. When I first heard about it the number was 5% but it kept growing and finally hit 15%. The big misstep here was, that after being the SoC leader starting in 2007 with the Snapdragon series of chips that powered the Smartphone revolution, QCOM did not make the jump to 64 bit in a timely manner. In fact, Apple beat QCOM to 64 bit with the A7 SoC in the iPhone 5s and QCOM responded with the most ridiculously famous quote:
“I know there’s a lot of noise because Apple did [64-bit] on their A7. I think they are doing a marketing gimmick. There’s zero benefit a consumer gets from that.”
You can read more about this misstep in embarassing detail in our book “Mobile Unleashed”. Chapter 9 “Press Q to Connect” is a complete semiconductor history of Qualcomm.
QCOM quickly abandoning their custom 32 bit Krait ARM based architecture and cobbled together off the shelf ARM Cortex 64 bit cores. This Snapdragon 810 was built on a leading edge TSMC 20nm process (same as the Apple A7) and failed miserably losing QCOM their largest customer (Samsung).
Fast forward to the most recent Snapdragon 820 and the new custom 64-bit Kyro ARM based architecture using the Samsung 14nm process and now QCOM is again in the SoC lead winning back Samsung (Galaxy S7 and Note7) plus many other devices around the world.
China is the best example of QCOMs resurgence. Apple and Samsung have both lost market share in China to Chinese smartphone companies: Huawei, OPPO, Xiaomi, and Vivo. All of these companies use QCOM chips and IP. China smartphone companies are now invading other emerging countries like India so this is a big upside for QCOM.
It has been reported that the next generation QCOM Snapdragon 830 has already been taped-out to the Samsung 10nm process making silicon available in the first half of 2017. You can bet the next series of Samsung phones and phablets will be packing the latest and greatest from QCOM beating Apple 10nm based devices to market. This will also be the first time QCOM will have the process lead over Intel! Yes, QCOM will have 10nm server, modem, and mobile chips BEFORE Intel!
The most recent QCOM quarterly numbers beat ($1.18 earnings per share and revenues of $6 billion against the consensus estimate of 98 cents in EPS and $5.6 billion in revenues) has the analysts excited about Qualcomm and semiconductors again, but not excited enough in my opinion.
QCOM owning the high end mobile SoC market again is a great foundation for what is coming next and that is server chips with their Chinese partnership that I have written about before, which brings QCOM head to head with Intel as a semiconductor company. Having already beat Intel in the mobile and modem chip business, a big server win in China will give Intel a serious financial pause and make Qualcomm the heir apparent to the Intel processor fortunes.
The proposed SoftBank acquisition of ARM is viewed as a serious net positive for QCOM since it has been long rumored that Intel, Apple, or even Samsung would acquire ARM. Not only does SoftBank provide a neutral home for ARM, the added financial strength gives ARM customers a much quicker roadmap into servers, IoT, Automotive, Drones, and every other device with a chip in it, absolutely.