Last week, Qualcomm held its Automotive Investor Day in New York City, and I was fortunate enough to attend. Christiano Amon, President, and CEO of Qualcomm, gave his keynote, and in it he referred to the event as “graduation day” for Qualcomm’s automotive business.
Investor days allow companies to provide a macro picture of the company’s roadmap and strategy, following the previous year’s financial and innovative progress report. It is also a great time to see from an industry analyst standpoint where the company sees itself within its industry. For Amon to announce Qualcomm Automotive’s graduation day reveals to investors and me that Qualcomm’s automotive business is disruptive. Let’s look at what Qualcomm and Amon announced at its Automotive Investor Day.
Automotive fits directly into Qualcomm’s One Technology Roadmap
One of the reasons Qualcomm was able to jump into the automotive market so easily is because it fits organically into Qualcomm’s existing markets. The future of automotive technology leverages what Qualcomm is already doing with its mobile handsets and IoT. This organic fit results from Qualcomm’s grandiose strategy to innovate from everything wireless to everything on the intelligent edge.
Qualcomm’s roadmap focuses on three technology areas that scale into Qualcomm’s various markets. It focuses on industry-leading wireless connectivity, hardware with high-performance, low-power computing, and software that AI drives. Its focus on connectivity, hardware, and software all take advantage of digital trends that span Qualcomm’s multi-market strategy. For example, AI is making its way through everything digital. Qualcomm is engineering its edge AI stack to be market agnostic, allowing the same edge AI to be in smartphones, cars, modems, RF, CPU, GPU, ISP, and any software that allows Qualcomm’s AI stack. As Amon said in his keynote, “The ability to develop AI once and have it run across multiple devices is how Qualcomm is uniquely positioning itself.”
The car as a service
This strategy allowed Qualcomm to jump into the Automotive business with connectivity, computing, and software technologies, meet digital automotive trends and increase its automotive capabilities and footprint all within the past five years. When I hear Amon mention the car’s transformation into a service model, I know that it is a scale-up of existing Qualcomm technologies that conform to automotive trends.
One statement that caught my attention from Amon was that the services and apps that come from the car being connected to the cloud could create whole new business models and could generate as much revenue for auto companies as the profit of selling the cars in the first place. The relationship between the consumer and the car is the dealership. Once the car is connected to the cloud the relationship between the car and the consumer is the services offered by the car.
The snapdragon digital chassis has become the embodiment of this concept that the revenue and value of a car is digital—service and app-based rather than physical. No longer will a car depreciate as soon as it comes off the lot of the dealership. Instead, value is integrated into the car as services and apps become the car’s value. I believe this is incredibly appealing to car companies because it is a stickier form of revenue than car sales.
Qualcomm has impressive automotive design wins
Since the automotive market is an already mature market and is transforming rather than pioneering, partnerships play a significant role in Qualcomm’s success. I believe Qualcomm’s one technology roadmap and strategy to scale puts it in a better position to relate to and form those automotive relationships.
It has allowed Qualcomm to accelerate its automotive business and have strong revenue growth of $1.3 billion in FY22 from $974 million in FY21. The one technology across multiple markets is attractive to automotive companies because of the potential it brings within their own platform. This potential is especially true when considering the digital trend of moving toward a car as a service model.
Another way to think about it is with the smartphone. When the smartphone became popular and the phone went through its digital transformation, we tried to put any technology we could into the smartphone. The same thing is happening with cars, where the digital transformation of the car allows it to adopt other technologies. If those other technologies are built on the same technology as the car—scaled up or scaled down—how much easier would it be to integrate that technology? I believe it is much easier to adopt those technologies if you know it is a scaled-up version of the technology you are trying to integrate.
A testimony to how well this strategy and roadmap is working for Qualcomm is that it reported a design win pipeline of $19 billion in its last earnings call. As of Qualcomm’s Automotive investor day, it is now $30 billion. This additional $11 billion automotive design-win pipeline shows how uniquely positioned the digital chassis.
One statement that caught my attention from Amon was that the services apps that come from the car being connected to the cloud could create whole new business models and could generate as much revenue for auto companies as the profit of selling the cars in the first place. I believe this is why Qualcomm was able to execute its initial ramp of the digital cockpit with 20 new vehicle launches. While Qualcomm’s Digital Cockpit is not the Digital chassis in its entirety, it is the dashboard of the future. It is where automotive companies know and are comfortable with the digital element of a car. I like to think of it as the first step in a completely digital transformation of a vehicle and where consumers meet the digital services and in-car experiences. Akash Palkhiwala, Chief Financial Officer at Qualcomm, said its Digital Cockpit will likely drive Qualcomm’s revenue growth. That is huge.
Qualcomm has also been expanding its Digital Chassis, expanding its advanced driver assistance (ADAS) and autonomous driver (AD) chipset roadmap to address L1 and L5. It also completed its acquisition of Arriver and acquired ADAS/AD software stack team. These milestones are huge for Qualcomm. Not only do they make Qualcomm’s digital chassis and complete stack, they also expand the automotive safety requirements that go into the Digital Chassis.
When you hear Marry Barra, CEO of GM say, “we have a vision of a world with zero crashes…” these steps towards ADAS/AD within Qualcomm’s digital chassis are exactly what she is talking about.
I agree with Amon in that this Automotive investor day was the graduation day for Qualcomm’s automotive business. Its automotive business roadmap fits directly into its one technology roadmap, and I believe Qualcomm is innovating on all sides. Qualcomm can focus on digital trends within the automotive industry because it is addressing the same trends in its other markets.
Its impressive $11 billion jump in design wins in a few months shows how Qualcomm is accelerating its automotive business. Its revenue growth to $1.3 billion in FY22 and its addition of ADAS/AD platform into the digital chassis tells me that it has a lot of momentum moving forward. Qualcomm is a leader in connectivity, and soon its Digital Cockpit will most likely drive its revenue growth. To say that Qualcomm is quickly becoming a leader in automotive technology would be an understatement.
Note: Moor Insights & Strategy co-op Jacob Freyman contributed to this article.