REUTERS: Qualcomm Inc.’s new CEO believes that by next year, his business will have the perfect chip for laptop makers looking to compete with Apple Inc., which debuted laptops last year that used a custom-designed central processing chip with better battery life. Intel Corp. and Advanced Micro Devices, two long-time processor vendors, have no chips that are as energy efficient as Apple’s. Qualcomm CEO Cristiano Amon told Reuters on Thursday that he believes his business can produce the greatest chip on the market with the support of a team of chip architects who formerly worked on Apple’s chip but now work for Qualcomm.
Despite political difficulties, Amon said in his first interview since becoming CEO of Qualcomm in San Diego, California, that the company is reliant on revenue growth from China to support its main smartphone chip business.
“We’ll go big in China,” he added, stressing that the United States’ sanctions against Huawei Technologies Co Ltd provide Qualcomm with an opportunity to produce significantly more revenue.
One of the pillars of Amon’s strategy, he added, stems from a lesson learnt in the smartphone chip market: It wasn’t enough to simply provide modem chips for wireless data access on phones. Qualcomm also had to offer the brains to turn the phone into a computer, which it now does for the majority of high-end Android smartphones. Qualcomm is now teaming modems with a strong central processor unit, or CPU, as it tries to push 5G connection into laptops, according to Amon. Qualcomm decided that instead of adopting computing core blueprints from longtime partner Arm Ltd, as it does currently for smartphones, it needed custom-designed processors if its customers were to compete with Apple’s new laptops.
Amon managed the US$1.4 billion acquisition of startup Nuvia this year as president of Qualcomm’s chip group, where ex-Apple founders helped build some of those Apple laptop components before leaving to form the startup. Next year, Qualcom will begin offering Nuvia-based laptop CPUs. “For a battery-powered device, we needed to have the best performance,” Amon stated. “We always have the option to license from Arm if Arm, with whom we’ve had a long relationship, creates a CPU that is superior than what we can make ourselves.” Nvidia Corp is in the process of buying Arm for $40 billion, a deal that Qualcomm has opposed to with authorities. Qualcomm, according to Amon, has no intentions to develop its own chips in order to reach the other major market for CPUs: data centers for cloud computing firms. It will, however, license Nuvia’s ideas to cloud computing companies that wish to manufacture their own chips, potentially pitting it against Arm.
“We are more than eager to cooperate with organizations that are interested in building data center solutions using the Nuvia CPU assets,” Amon stated.
CHALLENGE OF BRANDING
In its most recent fiscal year, phone chips contributed for US$12.8 billion of its US$16.5 billion in chip revenue. China is home to some of Qualcomm’s top customers, including phone maker Xiaomi Corp. Qualcomm is banking on revenue growth as former Huawei phone users switch to Qualcomm’s Android handsets. Huawei was forced out of the handset industry by Washington’s sanctions. Due to escalating US-China tensions, Kevin Krewell, chief analyst at TIRIAS Research, described it as a “political minefield.” However, Amon stated that the corporation could conduct business as usual in the area. “We don’t have to undertake forced joint ventures with technology transfers since we license our technologies. Our Chinese customers are up to date on their agreements, demonstrating respect for American intellectual property “he stated Amon’s second key difficulty will be keeping Apple as a customer. After a lengthy court struggle, Qualcomm’s modem chips are now found in all Apple iPhone 12 models. In 2017, Apple filed a lawsuit against Qualcomm, but later abandoned the suit and inked chip supply and patent license deals with Qualcomm in 2019. Apple is now working on semiconductors that will replace Qualcomm’s communications chips in iPhones. “The biggest concern for Qualcomm’s long-term stock multiple is that it’s as good as it gets right now since they’re shipping into all the iPhones,” said Michael Walkley, a senior analyst at Canaccord Genuity Group. Qualcomm has decades of experience creating modem chips, according to Amon, which will be difficult for any competitor to match, as well as the hole left by Huawei in the Android market. “The Huawei addressable market is as vast as the Apple opportunity for us only for the top tier,” Amon remarked. Another issue for Amon, a gregarious CEO who is animated onstage during keynote speeches, will be that Qualcomm is not as well-known among consumers as Intel or Nvidia, even in Qualcomm’s hometown. “I traveled into San Diego and ordered an Uber from the airport, telling him I was heading to Qualcomm. ‘You mean the stadium?’ he asked.” Krewell was referring to the old home of the San Diego Chargers, Qualcomm Stadium. To try to rectify that, Amon has initiated a new branding drive for the company’s Snapdragon smartphone CPUs. “Today’s smartphone sector is well-established. What’s behind the glass is important to people “he stated (Stephen Nellis in San Francisco contributed reporting; David Gregorio edited the piece.)/n
