11/12/2009
Dow Jones Newswires – New York Bureau
NEW YORK (Dow Jones)–Qualcomm Inc. (QCOM) Chief Executive Paul Jacobs sees the competition intensifying for its wireless chips in the very high end with smart phones, and at the low end with basic phones found in the emerging markets.
Both areas are seeing accelerating demand from consumers, and consequently, chip makers are rushing to fill that need.
“We see 2010 as a battleground for market share,” he said Wednesday during a meeting with Wall Street Journal editors. “We’re expecting price competition on the chipset side.”
More players will look to supply chips for high-end devices–whether they be small computers or smartphones. For instance, Intel Corp. (INTC) is dominant in the netbook market, but eventually wants to move down to the mobile phone level, where devices already act like mini-PCs. Qualcomm wants to use its own processor, dubbed Snapdragon, in devices larger than smartphones. Jacobs said he expects competitors such as Texas Instruments Inc. (TXN) to follow its path as well.
He added, however, that Qualcomm has an advantage over its rivals because it bundles together the processing chip to run the phone’s function with the radio that taps into the cellular network. Texas Instruments and Intel can only offer the processor and would still need an additional wireless chip.
Texas Instruments, however, is the processor featured in the high-profile Droid smartphone. The manufacturer, Motorola Inc. (MOT), is run by former Qualcomm executive Sanjay Jha.
Jacobs declined to comment on Motorola’s decision, but said that there remains opportunity to win business. He noted that while the Palm Inc. (PALM) Pre uses a Texas Instruments chip, the company’s sister phone, the Pixi, uses Qualcomm.
Qualcomm may also benefit from the traditional PC manufacturers looking for alternative suppliers for their products, Jacobs said, adding that many of the players would likely want to lessen their dependence on Intel.
Qualcomm has a vision for a line of tweener products it calls a smartbook, which has the always-on capability and low power usage of a smartphone in a larger package. Jacobs said that manufacturers are trying to rush to get the first smartbooks out by the end of the year, although they may be delayed until the first quarter of 2010.
There’s also fierce competition on the low end, Jacobs said, pointing to Taiwan chip-maker MediaTek Inc. (2454.TW) as a potential threat. He added that China remains a fastest growing market for the company, thanks to the ongoing buildout of its third-generation, or 3G, network. He is looking for India to start rolling out its second 3G network by the end of next year, which should bring another catalyst for growth.
The uncertainty was borne out by the company’s forecast for fiscal 2010, which fell below Wall Street expectations. Jacobs attributed the forecast to the expected price competition, a mix towards lower end products, and a foggy picture of where the growth would come from.
Wall Street has generally chalked up the shortfall to a conservative guidance.
Investors will be looking for more financial details at the company’s investor day conference slated for Thursday.
