Qualcomm Reinforces At IFA That It’s Consumer OEMs Secret Weapon Against Apple

Qualcomm CEO Cristiano Amon provided the opening keynote for the IFA 2022 show this morning in Berlin. IFA is Western Europe’s largest consumer electronics and appliance show, where device makers announce many of their newest products just in time for back to school and the holidays. Qualcomm used this year to make significant corporate announcements that I thought were interesting. Net-net, the company, reinforced that Qualcomm is the consumer device maker’s best technology bet to compete with Apple. I will list out the news and then provide analyst commentary on it.

Qualcomm made three significant announcements at the show- one with Meta, one with Bose and one about smartphone satellite communications. Here is information from the show:

Meta

Meta and Qualcomm agreed to “deepen technical collaboration” for next-generation platforms and core technologies. The companies agreed to a multi-year deal where Meta uses Snapdragon XR platforms (hardware + software) for the Meta Quest Platform. Meta CEO made a three-minute cameo appearance to inaugurate the agreement and publicly show support.

This announcement is interesting in many dimensions. I believe this solution uses off-the-shelf Qualcomm XR silicon, which isn’t exclusive. Meta has a silicon team that works on XR devices, and I believe the company realizes that it needs the extra firepower to take on Apple successfully. I’m glad to see a custom platform, not silicon, as Meta can differentiate, but Qualcomm can better leverage its resources and economies of scale. Seeing how Meta redeploys some of its silicon resources will be interesting. Meta has a giant MR vision and is also dedicated to devices like Portal, with a lot of silicon to work on.

It would have been great if Zuckerberg had shown up in person, but he doesn’t do much of that anymore.

Bose

Bose agreed to utilize Qualcomm’s S5 Audio SoCs in its future premium earbuds, headphones, speakers, and soundbars. Bose’s CEO, Lila Synder, says she wants to “raise the bar for consumer audio experiences” and “push the limits of what’s possible.”

The audio market has changed over the past few years. Bose has been losing market share to both the Beats (by Apple) and Apple brand of audio devices and obviously sees the Qualcomm value in getting that share back. Connectivity and management to and from other devices and services are imperative and drive purchase preference. Think about the criteria you used 20 years ago when buying a home audio solution versus today. Today, you want that speaker to play content from any cloud music service device and have speakers communicate with each other, maybe even tell these speakers what to do and play. Qualcomm has invested billions into these audio and connectivity capabilities.

Satellite communication capabilities

While not partner-related, Amon announced that it has been working with ecosystem partners, including satellite companies, to bring satellite communications to the world on your smartphone. He said the company would enable satellite communication capabilities in premium phones with the Snapdragon Modem-RF System. Last week, T-Mobile and SpaceX announced that the “vast majority” of smartphones already on T-Mobile’s network could connect to SpaceX Starlink satellites.

None of this is a coincidence. Qualcomm is likely the smartphone modem & RF behind the T-Mobile/SpaceX capability and, I believe, also behind Apple’s iPhone 14, which is expected to enable the same capability. Qualcomm isn’t new to satellite communications. The company designed the Globalstar air interface and started with Omnitracs, a satellite-based system for tracking trucks.

I see a lot of value in satellite systems to fill in the blanks where cellular may not make sense for the carrier. 5G can’t be everywhere, but when you need to text and in the future there’s the possibility of data and voice, it’s a good option. Case in point, I’ll be visiting Lake LBJ, a mere 40 minutes from downtown Austin and there’s no 4G or 5G connectivity. Right now, I’d love to have this capability to text if something happens and not require WiFi.

Summary

Qualcomm is in the middle of a portfolio expansion to IoT, RF and automotive while continuing to invest in its smartphone franchise. It is going well, to say the least. The IoT ($8B business), RF-FE ($4B business), and automotive companies ($19B backlog; $1.5B business) is growing parabolically, and Qualcomm is gaining content and profit dollars with its premium Android smartphone strategy. To execute this expansion affordably, it is leveraging key IP building blocks like CPU, GPU, video, AI, XR, DSP, modem, RF-FE, I/O and numerous software stacks across these new areas. I always thought the challenge for Qualcomm was to leverage but be good enough to displace many of the category killers or internal designs.