Key Concepts
- Diversification beyond handsets
- QCT (Qualcomm CDMA Technologies) revenue growth
- Apple modem transition
- Unique and competitive IP
- AI at the Edge
- Automotive business growth
- Content per vehicle
- ARM compatibility
Diversification and Revenue Streams
Qualcomm is actively diversifying its business model to reduce reliance on the handset market. The company projects that by fiscal year 2029, non-handset revenue will constitute 50% of its total revenue. This diversification strategy includes expansion into areas like automotive, data centers, and robotics. Qualcomm is aiming for $22 billion in net revenue from the handset business by fiscal 29.
A key metric highlighting this shift is the growth of QCT (Qualcomm CDMA Technologies) revenue, excluding Apple. Qualcomm expects a second consecutive year of double-digit growth (15%) in QCT revenue excluding Apple, indicating successful diversification.
Apple Modem Transition
The transition of Apple to its own modems is a significant factor influencing investor perception. Qualcomm believes investors are over-indexing on the short-term impact of this transition and still view Qualcomm primarily as a handset company.
Qualcomm emphasizes that it possesses unique and competitive IP across various domains, extending beyond communication technologies. This includes computing IP, specifically in CPUs and AI accelerators (NPUs), which positions the company for leadership in other industries.
AI at the Edge and IoT
Qualcomm is experiencing growth in the IoT sector, driven by the adoption of AI at the Edge. A notable example is the success of new personal AI devices like Meta glasses. The company exceeded expectations in IoT due to these new AI-powered devices.
Qualcomm is also growing in the Android market, exceeding its projected 5% annual growth rate and achieving around 10%.
Automotive Business
Qualcomm's automotive business is experiencing growth primarily through the conversion of its design win pipeline into revenue. As cars incorporating Qualcomm's technology are launched, revenue is realized.
Content per vehicle is expected to increase due to the growing demand for computing power in digital cockpits, ADAS (Advanced Driver-Assistance Systems), and autonomous driving systems. The shift towards software-defined vehicles, replacing microcontrollers with central computing units, further drives content growth.
AI on Device
Qualcomm demonstrated on-device AI capabilities two years prior, and these capabilities are now materializing in real-world applications. The Samsung Galaxy S24 showcases increased usage of Google Gemini Nano compared to previous models, indicating growing adoption of on-device AI.
Qualcomm highlighted the ability to run a 1 billion parameter model on smart glasses, enabling immediate responses to user input. This demonstrates the potential of on-device AI for real-time applications.
ARM Compatibility and Legal Outcome
Qualcomm is confident in its ability to build ARM-compatible CPUs. The trial outcome confirmed that Qualcomm is fully licensed for Orion CPUs and can continue developing ARM-compatible CPUs. Qualcomm views itself as a provider of high-performance ARM-compatible CPUs across its target markets.
Conclusion
Qualcomm is actively diversifying its business beyond handsets, with significant growth in areas like automotive and IoT. The company is leveraging its unique IP in computing and AI to drive innovation and growth in these new markets. While the Apple modem transition presents a challenge, Qualcomm is confident in its long-term strategy and ability to capitalize on emerging opportunities. The successful resolution of the ARM trial reinforces Qualcomm's position as a key player in the ARM ecosystem.
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