01/05/2010
Seoul Economic Daily
“When it comes to a business, you always have to look and say what are other people not-what do they believe-what’s wrong about they believe and then find another area. You need the blue ocean.”
Dr. Paul Jacobs, CEO of Qualcomm, leader of mobile chip industry had a interview with Seoul Economic Daily to celebrate the media’s 50th anniversary and emphasized that Korea’s economic and IT industry don’t just do what everybody else is doing in order to have competitiveness. Dr. Jacobs took an example of CDMA. He said, “In the early of 1990, when we did CDMA, everybody else was doing TDMA. So we had a good opportunity.”
Regarding to telecommunication market in 2010, “I think you can see a lot more data usage as more mobile computing comes out. Companies have to concentrate on developing innovative devices and services supporting various data capabilities,” said Dr. Jacobs. Meanwhile, Qualcomm is going to be making announcement for R&D center in Korea.
- Q: Seoul Economic Daily planed a feature article under the theme of ‘50 Years of Seoul Economic Daily, 50 Years of Korea’s Economic’ to celebrate its 50th anniversary. What do you think of the Korea and Korean companies have to make a great development for the economy and IT industry in the future?
- Dr. Jacobs: Based off of our experience of partnering with the Korean companies so closely, I think that’s clearly been a big success. Companies like LG and Samsung became global telecom powers by partnering well and focusing in on what they were good at, really focusing in on building the products and developing certain parts of the technology, but if I look at sort of the history, the thing that I think was really important was to focus on a global technology. So we had this period in Korea a few years ago where Korea was starting to develop technologies more for Korea, as opposed to – and then hoping that they would be global technologies.
- Q: Qualcomm generates 35% of its revenue from royalties. what’s your suggestion to the way to the Korean have to be a very strong in the patent intellectual property industry and the country?
-Dr. Jacobs: So the best way to get good patents is something that is don’t just do what everybody else is doing. So for example, when we did CDMA, everybody else was doing TDMA, so we had a good opportunity. And then while people were catching up on CDMA, we were working on both OFDMA and MIMO and we were also working on different ways to run the network. We were – we put data capabilities, we put the internet into the phone in early 19 – basically, 1991 or something and because of that, we always thought about data capabilities in the phone very early on. So I would say that’s the key. Don’t just – back then everybody said, “Oh, it’s voice.” No, we thought it was data. So we started working in data, use of the phone and patenting things there. So you always have to look and say, what are other people not – what do they believe – what’s wrong about they believe and then find another area. You need the blue ocean.
- Q: Most companies are going through the difficulty in the hard times because of the global recession and how has this impacted Qualcomm and at this, for what is the Qualcomm the biggest concern in this regard? And also, how can the Qualcomm handle this crisis and what is a strong point that the Qualcomm has the leading positioning during the past years for in telecommunication market?
- Dr. Jacobs: So what happened with us in the recession is that we saw the inventory levels contract pretty dramatically. So we didn’t do anything like a lot of companies did massive layoffs. We didn’t do that. What we did was we went to our employee base, we said, “Look, we’re going to freeze wages for the year, freeze hiring, everybody needs to focus in on cutting costs.
We’re not going to make one specific program about that. We’re going to ask every organization to take that responsibility themselves, find ways that they can manage their costs.”
- Q: Qualcomm has maintained its leading position for 25years in communication market. What is the secret?
- Dr. Jacobs: We launched a number of new technologies and new chipsets. I think we continue to drive technology forward very rapidly and particularly we launched 700 phones with partners last year, up from 400 the year before. So the fact of the matter is, there’s more and more devices out there. So it’s not just Qualcomm’s innovation, it’s the innovation that we’re working with partners to create as well.
- Q: what do you see for expecting something happen in the telecommunication market for the year 2010?
- Dr. Jacobs: Well, in 2010, I think you’re going to see a lot more data usage. You’re going to see that continue to expand and you’re going to see the operators start to be more concerned about the capacities of their networks. More demand for spectrum to be released and so forth because of that. I think you’ll see obviously the smartbooks come out, so you’ll see a lot more mobile computing being done on the platforms that came out in the wireless industry. I think you’ll see more emerging market as we see India’s licensing go and China continue to build out, Africa, Southeast Asia, all these emerging markets. I think you’re going to see more strength coming out of those markets. But also, you’ll see those markets not just be the low-end voice, but also go for data capabilities as well.
- Q: I heard about that when the Korean company had struggled at the patent dispute with the other American company, Qualcomm helped Korean company. Could you explain little bit?
- Dr. Jacobs: I mean it was always our goal to try and make the licensing of CDMA easier, so one of the things that we did when we negotiate our license agreements, we negotiated cross licenses also. So we’ve always tried to help our customers and the companies that are implementing CDMA not have to pay lots and lots of royalties. Which is why our strategy also on licensing is, we don’t charge extra – every new invention, we don’t charge extra. We just say, you pay a certain amount and we’ll give you all the inventions that we come up with. And so that’s always been our philosophy. And so when we see things happening a different way, we go help our partners. And I mean all these people are friends of ours because we’ve been working together for so many years. So you want to go help your partners and your friends when they get attacked. And by the way, they help us, too.
- Q: If you put the money at Korean stock for investment, which Korean companies will you choose?
-Dr. Jacobs: I might invest in the companies that are our partners. And they’ve done extremely well. So you look at the kinds of positions, companies like LG and Samsung. I mean they are amazing. And also the investments that they’re making in fundamental technologies, too, I think those are going to pay off over the long term. So I mean I actually don’t invest that much outside the US, which I probably should, but I don’t. And so I haven’t personally done it, but I definitely believe in those companies.
- Q: What is Qualcomm’s plan for R&D center in Korea?
- Dr. Jacobs: Qualcomm is going to be making announcement – I mean the investment process is already very far along and we’ll be making an announcement sometime in the first quarter and similarly, we’ll be making announcements about what we’re doing on the R&D side also. So it will happen early next year.
- Q: The KFTC imposed $230 million fine. What do you think about it?
- Dr. Jacobs: So for the KFTC, I mean we still haven’t actually gotten the order yet, so it’s hard to discuss the details of it. Obviously we don’t agree and we’ll plan on appealing. And some of the things that we’re accused of things that were negotiated as part of agreements with the government in the early days of CDMA. So it’s a little hard to see why that’s illegal now. But we plan on appealing the decision and it will go through the courts and we think that we’ll continue to defend ourselves there.
- Q: What do you think about the opinion that Qualcomm collects high royalties from Korean companies?
- Dr. Jacobs: On the royalty side, I mean I think the best way to look at it is, we do R&D, we do aggregated R&D for the industry. So a lot of companies wouldn’t be doing specific R&D necessarily. We do it and spread it out to all of our partners. And if you look at the money that we take in from royalties, we spend a very, very large amount of that back on research and development. And that’s, I think, helped our Korean partners become more successful. They tend to lead the market with technology and it’s because we work together on that and so I would say that there’s value that’s being generated to our partners and our licensees by the money that they pay in royalties, we return in technology. And if that stopped, you would have a small decrease in the price of the phones, but then the phones would get commoditized and everybody’s margins would get squished. So for them, it’s really important that the technology keeps moving forward. The partnership has worked well for both companies, for us and our licensees.
- Q: In the long term, is Qualcomm planning as still the investment, put the money to the Pantech and what’s your plan for the investment to the Pantech?
- Dr. Jacobs: We made that investment as a way to help Pantech because they’re a good partner and they do a lot of very innovative things. We’ve done similar kinds of things in the past with other manufacturers. We had an investment in HTC, for example, from Taiwan in the early days. So for us, that’s what it was about, really, helping out a partner, and then as they improve their business, then that gives us an opportunity to make money on that investment. So their plan is to grow their business from here, not to come back and ask us for more investments.
