Qualcomm have had a difficult few months. We’ve seen the antitrust case in China settled with a $975 million check and concession to charge customers lower royalty fees to use Qualcomm chipsets. We have also seen the Snapdragon 810 not used in the Samsung Galaxy S6 flagship device, as Samsung used a superior performing processor (their in house Exynos 7420 chip), combined with reports that Snapdragon 810 devices offers relatively little additional performance over the previous generation Snapdragon because the processor is “constrained by the thermal envelope,” in other words it had to be throttled back to avoid it overheating. The settlement also included a requirement for Qualcomm to be more transparent with its Chinese business operations.
Following this fallout, it appears that Qualcomm are going on something of a charm offensive, at least in China. The Wall Street Journal writes that Qualcomm is building a “globalization office” in Shenzhen, designed to help companies use Qualcomm chips in their devices and in preparing them for overseas markets. In essence, Qualcomm are seeking to help Chinese smartphone and tablet manufacturers sell devices around the world. Steve Mollenkopf, Qualcomm’s Chief Executive Officer, said that after the investigation and price cut, “more customers in China have shown willingness to sign licensing agreements.” It would appear that the price cut has made the businesses’ System-on-Chips (SoCs) more competitive and this is a good thing, providing Qualcomm can get the volume back.
The globalization office is also joined by the recent deal struck between Qualcomm and local (Chinese) processor foundries, to produce the low cost chips. It is an important point to note that whilst the high end Qualcomm Snapdragon 810 SoC has been getting the headlines, the business has a healthy market at the lower end with the Snapdragon 400 and 410, plus a number of middle-range processors in the 600-series. Qualcomm is also planning on starting a $150 million fund to invest in local businesses. Qualcomm is helping Chinese manufacturers sell their smartphones, with a locally-manufactured Snapdragon chipset inside, around the world.
Qualcomm have a difficult road ahead, but are setting down the foundations to allow the chip designer to succeed in an important overseas market. By concentrating on the lower to mid-range processors, having these manufactured at a local level and helping Chinese businesses to sell smartphones overseas, Qualcomm appears to be setting an important foundation. These changes will not make up for the loss of the Galaxy S6 business overnight but in the medium to longer term, should put Qualcomm into a strong position.
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