Gobi and QCOM's future

Wednesday, October 24, 2007

In the previous article, I mentioned the importance of Gobi to QCOM. As a strategic move, it is important for the company as it pushes to preserve the interests of 3GPP and 3GPP2 vs WiMax. More importantly, this is an attempt to skew the 3G silicon market share in its favor.

As I have highlighted elsewhere, I have reasons to believe that if QCOM does not mend relationships with the handset vendors, it risks being marginalized on the chipset market share despite stellar products. And more than anyone else, the executives at QCOM are aware of this. There are two paths and the company will attempt one or both -
  • re-inventing itself as it diversifies into new markets and product lines
  • making handset vendors happy by reducing royalty rates 'somewhat' in return for a higher chipset market share.
The Gobi move fits well with the first bullet point. Also, this can spawn a series of future products and will give QCOM the edge if the concept takes off. For one, I can see this evolve to 4G systems when they begin to replace the CDMA-based systems. Secondly, I don't see QCOM shying away from throwing WiMax into the mix if push comes to shove. As the company emphasized, WiMax is not in right now since (read only since) no viable service is being provided nor is there a substantial pervasiveness as yet. Let us keep in mind that QCOM does have the mobile assets of TeleCIS and can deliver when needed. It would be naive of anyone to think that the company is keeping its WiMax assets dormant amidst all its public posturing.

And let me re-iterate: QCOM will diversify and the PC/Laptop/Notebook market is lucrative. It will attempt to capture more of the silicon in this space. Based on the direction of all the lawsuits and licensing discussions, I expect it to internally shift some focus to other segments so it can compensate for any lost margins due to licensing fee reductions. Watch out for any announcements pertaining to integrated WiFi products coming from its Airgo acquisition.

It has an uphill battle though, because it has to establish credibility in such new markets amidst potential mudslinging. But given history and its technical leadership, I would not be surprised if it easily does that provided there is some tempering of its characteristic aggression.

Posted by Vijay Nagarajan at 6:54 PM  

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