Qualcomm plays to its strengths with Snapdragon launch

Comment On a financial analyst tour in the UK last week, Qualcomm CEO Paul Jacobs lamented that, on a day when the chipmaker made a string of major announcements, the commentators were only interested in asking about the licensing disputes with Nokia.

Important as that relationship is to Qualcomm's future performance, analysts would be well advised to listen rather more closely when the CDMA giant talks about new products.

In the end, what will cushion Qualcomm even if anti-trust and licensing arguments go against it will be its technological excellence, and its ability still to rely on turning out good chips that customers need to buy.

As such, last week's launch of Snapdragon, which brings advanced connectivity to consumer devices, should be given as much weight as the latest Nokia spat - while the latter may highlight Qualcomm's key vulnerabilities, the former plays to all its main strengths, such as its leading ability to integrate and shrink technology and its shrewd understanding of where operators' business models are heading, and how silicon needs to support that.

Jacobs insisted last week that he saw Intel, not Texas Instruments (TI), as the key challenge to Qualcomm, regarding the latter as too driven by the Nokia business to lead market trends or to be truly broad brush.

However, Snapdragon reinforces the view - especially with Intel pulling away from its XScale smartphone architecture to concentrate on challenging the mobile chipmakers with WiMAX and Wi-Fi - that the new cellphone generation is a battle with only two real contenders, Qualcomm and TI.

This is a generation of devices that needs to combine new extremes of compactness, low power and low cost, to support accelerating operator business cycles and cope with unprecedented price pressures on handsets, with integration of the full set of multimedia functions, including ultiple radios, television and easy coexistence with other broadband platforms such as set-top boxes.

The two majors have both dramatically honed their skills at these two extremes in the past two years, resulting in architectures like TI's eCosto and LoCosto, which combine its advanced multimedia application processor platform OMAP with VoIP and video functionality in an "out of the box" reference platform, offering high function multimedia at very low cost, addressing the consumer demands of emerging markets like China.

For Qualcomm's part, it has moved rapidly to push HSxPA, CDMA EV-DO, Wi-Fi, mobile television and various VoIP and video functions into single-chip architectures, reference designs and highly integrated chipsets targeted at advanced consumers in emerging markets.

It has taken key differentiators from CDMA, notably extreme integration and strong multimedia software like Brew, into the UMTS/HSxPA world and could also, political objections aside, exploit the same advantages in WiMAX, a step Jacobs hinted last summer would happen once Qualcomm saw sufficient market mass for 802.16 chipsets.

Where Qualcomm has generally been perceived to lag, TI has been in the application of consistent architectures beyond the handset, so tapping into the fixed/mobile convergence market and the increasing connectivity between cellphones, PCs and set-tops.

Snapdragon is an important move to build on the existing strengths and also to steal a march on TI, more naturally suited, given its set-top box business, to convergence, in this critical area of operator interest.