Dubai: Qualcomm is still very optimistic about China despite facing stiff challenges in the smartphone industry, and the chipmaker is enabling new verticals for future growth.
The US company is encountering difficulties in collecting licensing revenues from China, the world’s largest consumer of mobile phones, last year.
The shortfall in licensing revenue contributed to a 44 per cent decline in chipmaker’s fourth-quarter profit as some Chinese handset manufacturers did not pay royalty payments on Qualcomm’s wireless technology patents.
Moreover, the chipmaker also faces tough hurdles from other smartphone manufacturers such as Apple, Samsung and Huawei as they rely on their own components rather than Qualcomm’s processors, apart from other chipmakers.
Jay Srage, president of Qualcomm Middle East, Africa, South East Asia and Pacific region, told Gulf News that 43 per cent of the worldwide smartphones are going to be from China compared to 39 per cent in 2014.
In 2016, he said that 52 per cent of smartphones will be from China. The fastest acceleration of any mobile technology was triggered by China.
Royalties
The volume of smartphones coming out with 4G is much higher and at a cheaper price.
“Our intellectual property is fundamental to the business model and we were the first to lay the foundation for 3G and 4G technologies. Every product that uses it is using a portfolio of our IP. The model has been validated for the past few years,” Srage said.
Qualcomm uses those royalties to drive its R&D engine. Last year the company spent close to $4 billion (Dh14.7 billion) in R&D mobile technologies.
If that model [IP] is disrupted, he said that there is a negative consequence on the industry. After the NDRC (National Development and Reform Commission) ruling last year, he said that they have started to sign up more licensees under new terms with Huawei, TCL and ZTE.
“What we are seeing is progress in terms of signing up big licensees first and then going to trigger more on other Chinese vendors. We don’t want to be in the ultra low-cost smartphone segment like $50 as it is very competitive and high pressure on margins. We choose to be on the innovation side and driving the road map that drives more high-end products,” he said.
Chinese chipmaker MediaTek is very popular among OEMs for low-end phones but they are struggling to be on the premium devices.
Re-aligning resources
Srage said that Qualcomm’s strategy is to expand beyond smartphones and into the internet of everything and consumer electronics.
“We are adapting to an accelerated and diversifying mobile environment, Re-aligning our resources, strengthening regional presence, accelerating 5G R&D, enabling new verticals.
He said that Qualcomm has shipped more than 900 million smartphones in 2015 and more than 8 billion chipsets worldwide.
“In emerging countries, we believe that mobile will be the single biggest driver of innovation and growth in the years ahead. For many people, their mobile phone will be their first experience with the internet. Data and content from the internet will play a critical role in improving people’s lives. Our focus is to bridge the digital divide by connecting people to the internet from their mobile phones,” Srage said.
“In the region, we have 40 per cent 3G subscribers now, 82-85 per cent across of 3G/LTE devices. The established base of devices is much higher than the number of subscribers but the subscriber base is accelerating quickly to catch up with the base,” he said.
By 2020, it is forecast that mobile subscriptions in the region will grow at a compound annual growth rate of six per cent, amounting to 970 million.
