On Tuesday, Qualcomm investors will decide the fate of the Broadcom-Qualcomm deal. After very careful analysis and consideration, I do not like this deal, as I believe it would result in the destruction of both Qualcomm and Broadcom, would slow down 5G deployment and future "Gs", and would limit competition in many markets. As I have said before, a Qualcomm and Broadcom combination will be like mixing oil and water. Qualcomm creates standards and core IP and invests ten years out focusing on innovation and Broadcom is an IP implementer, investing maybe three years out, focusing on cost-cutting. Qualcomm certainly doesn't need this deal as the company is growing in the non-digital modem portion of the equation with RF front ends, automotive, and IoT. I have analyzed and written on all of these, but let's review.Growth without Broadcom, NXP or Apple Qualcomm is a conservative company and therefore does not usually telegraph new markets or new products, but given Broadcom's hostile takeover attempt, Qualcomm had to disclose their growth plans and growth in new markets. What have we learned over the past few months?
- Automotive, IoT, WiFi: At CES 2018, Qualcomm said it grew over $3B in 2017 in new markets, specifically automotive infotainment, IoT and security, and WiFi. According to ABI Research, Qualcomm has the #1 market share position in WiFi, surpassing Broadcom. According to NPD in December 2017, 40% of the US retail home WiFi market was mesh WiFi and only Qualcomm has this technology. Broadcom does not have this technology deployed in this market. In addition to the $3B in 2017, Qualcomm also announced a huge automotive pipeline of over $3B given its progress in infotainment. So this isn't "I'd like to enter automotive", its, "all major automakers use Qualcomm technologies". Qualcomm disclosed that 34 automakers use their automotive silicon.
- Full RF solutions: Qualcomm has built a full RF front-end portfolio, competing directly with Broadcom, Qorvo, and Skyworks Solutions. Like automotive, this isn't a promise of a competitive product line, this is real products adopted by real customers. So who did Qualcomm announce as RF commits? At CES 2018 Qualcomm announced Google, HTC, LG, Samsung, and Sony. At the end of January, Qualcomm announced that Lenovo, OPPO, Vivo, and Xiaomi signed $2B memorandums of understanding (MoU) with Qualcomm for RF chips over three years. A few days after the China announcements, Qualcomm announced a deal with Samsung and Qualcomm's QCT that I am told by undisclosed sources that this includes RF, too. In late February, Qualcomm announced a full 5G module digital and analog solution, an RF hexaplexer for 4G and 5G, and more "modem to antenna" wins with Asus and Sony, which include full RF solutions. If it's not apparent, Qualcomm is "all-in" on RF and poses a major threat to Broadcom, Qorvo and Skyworks Solutions.
- 5G: There is no industry argument amongst industry analysts on who is the rabbit in mobile 5G. With the giant 5G chip Huawei showed on stage at MWC last week, it put all doubts to rest that if you want mobile 5G first, you need to partner with Qualcomm. Qualcomm built mobile 5G and they came. First was China, where ZTE, Xiaomi, Vivo, OPPO, Lenovo, and Wingtech signed onto the Qualcomm "5G Pioneer Initiative". China wants to beat the world with mobile 5G and this was their commitment. At the beginning of February, Qualcomm announced that 18 OEMs would use Qualcomm's X50 modem and that 19 carriers would support devices that have it inside. The China 5G list reads like a laundry list including ASUS, Fujitsu, HMD (Nokia), HTC, inseego, LG, NetComm, Netgear, OnePlus, OPPO, Sharp, Sierra Wireless, Sony, Telit, Vivo, WNC, Wingtec, Xiaomi, and ZTE. The operators include AT&T, BT Group, China Telecom, China Mobile, China Unicom, Deutsche Telekom, KDDI, KT, LG U+, NTT DoCoMo, Orange, Singtel, SK Telecom, Sprint Corp, Telstra, TIM, Verizon Communications, and Vodafone. Finally, At the end of February, Qualcomm announced their 5G platform play whereby they would offer a full turnkey 5G module taking a thousand discrete parts and turning them into a pre-tested, validated and performant solution. Any questions on who is leading in mobile 5G? It's not Broadcom, Qorvo or Skyworks.
- China Mobile Chief scientist Yi Zhiling via Cb.com's Li Zhenghao: “If I have the voting right, I will vote against the deal,” said China Mobile’s Chief Scientist Yi Zhiling during an interview with China Business Journal at MWC 2018 on the afternoon of February 28. “Personally, I believe that Broadcom’s acquisition of Qualcomm has no positive value to the industry. If the deal does be done and does be led by Broadcom, then personally I am quite worried about whether Broadcom will leverage Qualcomm’s value well.” China Mobile is the world's largest carrier with nearly a billion subscribers and according to Technode, has 80% of the profits.
- America Movil CMO Marco Quartorze via Forbes Latin America Carlos Morales: "Normally when there is consolidation, the prices go up. The less competition, the less players there are in the market, the higher the prices. Having strong and independent players generates a better service for all."
- DoCoMo via ch.nvideo.jp: "NTT DOCOMO is commenting“As now is the time when preparation for 5G to go full swing, we are very concerned about change of management of Qualcomm” on this proposed acquisition."This affirms the risk to the 5G rollout of Broadcom acquires Qualcomm.
- TMobile CTO Neville Ray via Twitter: "Looking forward to a strong 5G future with these guys!" with a picture of Qualcomm's 5G booth at MWC. To me, this is a veiled "we don't want a change" statement.
- TIM CSO Atillla Somma via HDTim blog: "Qualcomm represents, therefore, a valuable partner for this phase of standards definition and research, as well as a fundamental asset in the mobile revolution." I don't normally see carriers gushing over chipmakers, but Somma makes his point clear.