Qualcomm Still Faces Issues Even With Antitrust Done

US chipmaker Qualcomm Inc faces big challenges in its most important market even after agreeing to pay a record near-$1 billion fine in China for antitrust violations.

As low-cost, low-margin Chinese smartphone manufacturers such as Xiaomi Inc and Huawei Technologies push into other developing markets, they are driving down average handset prices which is bad news for San Diego-based Qualcomm, which collects royalties based on the handset’s value.

Qualcomm could see its margins slip, eroding its profits, as firms like Xiaomi and Huawei push their budget devices into markets such as India and Latin America.

While sales of high-end devices like Apple’s iPhone remain robust and generate hefty profits for Qualcomm – the average selling prices for smartphones in developing countries will fall to $102 by 2018 from $135 last year, predicts IDC. In the United States, smartphones often sell for more than $600 without a contract.

Qualcomm, a long-time leader in wireless chip technology, is also under increasing competition from Taiwan’s MediaTek and a handful of small Chinese chipmakers that specialize in making chips for low-priced phones.

The company has led the industry with LTE technology, giving it a major advantage in the recent roll-out of the advanced technology in China. But Intel, Marvell, MediaTek and HiSilicon, a unit of Huawei, are making inroads.

In the second quarter of last year, Qualcomm’s global share of LTE baseband chips dipped to 89% from 95% a year before, largely due to the success of emerging Chinese competitors, said StrategyAnalytics analyst Sravan Kundojjala.

Last month, Qualcomm cut its annual revenue outlook partly because a major customer chose not to use Qualcomm’s newest processor in its next top-tier phone.

The company also said it expected increased competition in China in medium and high-end devices, a part of the market it has traditionally dominated. Huawei, which sold about 75 million handsets in 2014, uses its own HiSilicon processor for its flagship Ascend models.

Qualcomm rival Intel is also eyeing a comeback in the mobile market after striking an alliance with the Chinese government, saying in September it would invest up to $1.5 billion in state-owned chipmaker Spreadtrum to jointly develop processors.

Leave a Reply

Your email address will not be published. Required fields are marked *