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8/16/13

Intel and Qualcomm step up chip battle - FT.com

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January 11, 2012 1:03 am

Intel and Qualcomm step up chip battle

By Chris Nuttall in Las Vegas

Qualcomm and Intel, respectively the world’s leading mobile phone and PC chipmaker, announced deep incursions into each other’s territory in duelling speeches at the Consumer Electronics Show in Las Vegas on Tuesday.

A range of devices will form the battleground for semiconductor superpowers that are now closer to matching each other on battery life

and performance.

Paul Jacobs, Qualcomm’s chief executive, said its latest S4 Snapdragon processor would find its way into laptops before the end of the year.

Paul Otellini, Intel’s chief executive, introduced the first smartphone to feature its Atom chips – a Lenovo device that will go on sale in China in the first half of the year.

The growth of smartphones and tablets as alternatives to the PC is also producing new alliances. Qualcomm’s processors, based on designs

of the UK’s Arm, have enjoyed exclusivity in Windows-based smartphones – a relationship that echoes the old “Wintel” PC partnership

between Microsoft and Intel.

PC partnership between Microsoft and Intel . Intel has established a partnership with Google , adapting

Intel has established a partnership with Google, adapting its Android operating system to work on Intel’s “x86” designs as well as Arm’s.

Mr Otellini and Sanjay Jha, chief executive of Motorola Mobility, the handset maker being bought by Google, announced a multiyear,

maker being bought by Google , announced a multiyear, multidevice strategic relationship, beginning with Motorola

multidevice strategic relationship, beginning with Motorola shipping smartphones using Atom processors with Android in the second half

of the year.

Lenovo’s K800 smartphone, available in China in the second quarter, will also run Android and use the Atom Z2460 processor, formerly codenamed Medfield.

This is the first system-on-a-chip from Intel to be competitive with chipsets from established mobile phone chipmakers – it marks a dramatic reduction in size and power requirements.

It still lacks the multicore capabilities of smartphone and tablet rivals – both Qualcomm and Nvidia are moving to quadcore chips – but

Intel said the chips’ hyperthreading technology still enabled multitasking.

On the sidelines of the show, Intel executives have been demonstrating a prototype smartphone with features such as its camera’s ability

to take 15 8Mp pictures a second in a “burst” mode.

to take 15 8Mp pictures a second in a “burst” mode. In depth: International CES 2012
in a “burst” mode. In depth: International CES 2012 The world’s largest consumer electronics show this

The world’s largest consumer electronics show this year sees 2,700 exhibitors displaying their wares in Las Vegas between January 10 and 13

They also claim that their work on software means many Android apps will be able to run faster on Intel

chips than comparable Arm-based ones.

Qualcomm will take advantage of Microsoft’s decision to bring Arm compatibility to its latest operating system – Windows 8 – when it is launched later this year. Mr Jacobs, who demonstrated a prototype Windows 8 tablet running on a Qualcomm S4 Snapdragon processor, said 20 manufacturers had more than 70 designs in the pipeline for Snapdragon devices that were not phones.

“Your next PC will deliver an always-on, always-connected experience

industry know something about,” he said, adding that Qualcomm was talking to PC makers about building

thin and light computers with long battery life, based on its chips.

something we in the mobile

These could challenge the new ultrabook category being pushed by Intel at the show, which has the same features.

Mr Otellini said Intel would raise the bar on tablet experiences when Windows 8 was introduced. Its chips would ensure compatibility with the millions of existing applications and devices, as well as supporting Metro, the operating system’s touch-based interface for tablets that

8/16/13

Intel and Qualcomm step up chip battle - FT.com

will be offered as an alternative to the standard Windows desktop.

8/16/13 Intel and Qualcomm step up chip battle - FT.com will be offered as an alternative

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Mobile: Intel Will Overtake Qualcomm In Three Years

By Mark , JANUARY 17, 2012 9:00 PM

In Three Years By Mark , JANUARY 17, 2012 9:00 PM 1. Is A Changing Of

1. Is A Changing Of The Guard Imminent?

When you are done reading this article, you will agree that Intel is going to overtake Qualcomm in three years. We know that Intel's technology hasn't gone into any smartphones yet, while Qualcomm realized more than $4 billion of revenue in the last quarter.

So, to make our point, we have to perform a magic trick. All magic tricks have three acts. The first part is called "The Pledge." That's where we do something ordinary: talk about CPU architecture. Any editorial team can do that. The second act is called "The Turn." We take our ordinary article and make it do something extraordinary. This is where we get into the details of chip fabrication and the history of mobile GPUs, something only a few editorial teams can do.

Now you're looking for the punchline. You still don't believe Intel has what it takes. But you won't see the secret because you don't know where to look. You don't really want to know. You are waiting to be fooled, and you're not yet ready to clap because writing about CPU architecture, chip fabrication, and mobile graphics isn't enough. That's why every magic trick has a third act, the hardest part, the part we call "The Prestige."

Three years ago, Internet Explorer was the industry’s dominant Web browser. Today, Google Chrome is in the lead. Today, Qualcomm is the dominant player in the mobile system-on-a-chip (MSoC) industry. In less than three years, Intel will take that position away.

That’s a bold claim, sure. But our team has been following the tech industry for over 15 years, and we’d like to think that experience gives us a unique perspective. We’ve seen AMD and Intel duke it out, ARM overtake MIPS and Super-H, and PowerVR and BitBoys rise from the ashes.

MSoCs are going to be a hot topic for the next three years, so you’re going to see a lot of prognostication. You’ll have completely crazy predictions, such as Robert X. Cringley’s. He’s the former tech writer for PBS.org who was once caught faking a Ph.D. from Stanford University and recently predicted that Intel was going to buy Qualcomm.

In our analysis, Intel will actually prove itself the company to beat.

A Difference Of Opinion White papers and architectural analysis are very different from actual implementation

A Difference Of Opinion

White papers and architectural analysis are very different from actual implementation and real-world testing. When most tech writers discuss a company’s developments, they use the abstract. But companies don’t create technologies; individual people do.

Take sports teams as an example. The Lakers might be better some years than others, but players like Kobe Bryant and coaches like Phil Jackson make Los Angeles a championship team. Put simply, when a company gets bought, rarely does the buyer want the whole company. Rather, it’s paying a premium for access to certain patents and, more importantly, access to critical human talent within the company.

To that end, the future of MSoCs will depend on, first, SoC architecture, second, fabrication skill, and third, graphics technology.

FTC disclosure: We own no stock in any of the companies discussed today. We work with all of them, though, and we review hardware that includes technology from each of the involved organizations.

includes technology from each of the involved organizations. 2. The Pledge: CPU Architecture A lot of

2. The Pledge: CPU Architecture

A lot of people assume that all MSoCs are the same. A company takes a licensed core from ARM (say a Cortex-A9 or a Cortex-A15), combines it with a graphics processor like Mali or technology from PowerVR, it adds memory and I/O, and then ships it off to manufacturing.

It's suggested, then, that all licensed cores perform exactly the same way. More savvy techies know that ARM is an instruction set, and while companies can buy a fully-capable CPU core from ARM, layout design (such

as what Intrinsity did for Apple and Samsung) can improve performance. Companies can also develop a brand new chip on their own, without using any of the ARM design. That’s what Qualcomm has been doing with its Scorpion core, and soon, its Krait design. Nvidia is doing the same thing with “Project Denver,” relying on its patent/technology acquisitions and human expertise from PortalPlayer, Transmeta, and ULi.

But the computational core only plays a small part of the overall system’s performance. You have to deal with variables like memory bandwidth, bus architecture, and cache policies. It’s not just bandwidth either, but also memory latency. That was one of the many reasons why AMD’s Athlon 64 was superior to Intel’s Pentium 4, and the biggest reason why Apple’s iPad 2 does so much better than its competition in terms of responsiveness and performance. It’s not simply an off-the-shelf design.

In order to predict which company will have the dominant MSoC in three years, we have to figure out two different things: which team is best set up to achieve the highest raw performance, and which team is most likely to go the furthest with power consumption?

Raw CPU Performance

Let’s talk about raw performance before we discuss power consumption. There is no question whether Intel has the best resources to achieve the fastest processors. ARM and Qualcomm are going to face the same growing pains that the x86 world has already struggled through.

In the next processor generation, Qualcomm is transitioning from its partially out-of-order Scorpion architecture to Krait, a full out-of-order design. Krait should more effectively facilitate peak CPU utilization, maximizing efficiency.

facilitate peak CPU utilization, maximizing efficiency. At the same time, Qualcomm is now navigating uncharted

At the same time, Qualcomm is now navigating uncharted territory, where its engineers have less expertise. ARM already has some experience with its Cortex-A9, which is out-of-order-capable. But even with the upcoming Cortex-A15, the company will be relying on dedicated reservation stations (the instruction queue) for each of the execution units. While Intel and AMD used dedicated reservation stations in the past, both now employ unified reservation stations to improve performance and utilization. Unlike ARM, Qualcomm is attempting to jump directly to a unified reservation station design. The original Pentium Pro used a unified reservation station, so it’s not inconceivable to think that a company could pull this off successfully.

The Atom architecture doesn’t incorporate any of Intel’s advanced technology. It’s a single-core, in-order design that is more reminiscent of the Pentium CPU than anything modern. But here’s the thing: it’s already faster than the ARM-based competition. As performance demands start to increase, Intel has access to decades of expertise to drop into Atom. We’ve heard that Atom would go to an out-of-order core within five

years of its launch, landing it in the 2013 range. So, ignoring power consumption, there is little doubt that Intel can put out faster processor designs.

doubt that Intel can put out faster processor designs. 3. Raw Platform Performance The same can

3. Raw Platform Performance

The same can be said about memory architecture and latency. With the exception of Apple’s solution, today’s MSoCs have pretty miserable performance. Apple’s bus architecture is unique among current MSoCs, and it has talent from P.A. Semi (started by the lead designer of the DEC Alpha and StrongARM CPUs) and Intrinsity (started by Paul Nixon, who headed Exponential Technology’s x86 CPU project; Paul is now with TI, but in the MCU division).

CPU project; Paul is now with TI, but in the MCU division). We have yet to

We have yet to see a demonstration of a high-performance bus from ARM, TI, or Qualcomm. The Tegra lineup from Nvidia doesn't have a memory bus that is significantly different from the competition (its shipping Tegra 3 still has less memory bandwidth than last year’s Apple A5). But we're not going count Nvidia out because it has experience with NV2’s ring memory bus, a proven track record with the nForce2 platform, and experience with crossbar memory controllers on its GPUs. It just hasn’t prioritized those things in its Tegra family.

just hasn’t prioritized those things in its Tegra family. Intel, on the other hand, has always

Intel, on the other hand, has always done pretty well with the performance of its platforms (just look at its current Sandy Bridge-E architecture). Again, the challenge for Intel is power consumption, rather than performance.

Raw Wireless Performance

Intel has zero expertise with wireless 3G/LTE. But it has an excellent track record with 802.11-based performance. The company’s Centrino platform was responsible for Intel’s dominance in the PC laptop world.

With the acquisition of Infineon Wireless, Intel gained significant expertise with 3G/LTE. Qualcomm, on the

Performance Summary other hand, has always had a strong 3G/LTE offering. But its 802.11 had

Performance Summary

other hand, has always had a strong 3G/LTE offering. But its 802.11 had to be acquired, and that was achieved with the purchase of Atheros. For wireless, Qualcomm has the lead in 3G. The advantage isn’t as clear in LTE, though. Both Intel and Qualcomm also face pressure from Nvidia, which owns Icera, a software baseband company, and Samsung, NTT DoCoMo, Fujitsu, and NEC, collaborating to develop 3G/LTE products.

In the next three years, ARM and Qualcomm need to invest significant resources to advancing CPU performance. Their engineers are navigating uncharted territory, attempting to push technology in the same way that the x86 segment had to struggle through several decades ago. From a pure performance standpoint, and ignoring power consumption, Intel, AMD, and Apple (through its acquisitions, which include Intrinsity and PA Semi) have the most human equity in high-performance mobile computing, particularly in the areas of bus architecture and memory management. Nvidia is a wild card, with a seemingly rich portfolio of technologies—though we’ve yet to see an implementation of its more complex bus and memory designs.

But of course, an emphasis on power efficiency is what makes MSoCs so unique, and that is supposed to be Intel’s unconquered challenge.

and that is supposed to be Intel’s unconquered challenge. 4. The Turn: Fabrication The reason ARM

4. The Turn: Fabrication

The reason ARM is dominant on the mobile side is that, to date, Intel has been unable to demonstrate a power-efficient MSoC. In this world, trumpeting impressive performance-per-watt numbers isn’t enough. You actually have to be able to show off a full day’s worth of talk time and impressive standby numbers in order to be functional. With Medfield, Intel demonstrates that its team has the technical know-how to produce an MSoC within striking distance of ARM. As Intel put it, Medfield buys the company a seat at the table.

to produce an MSoC within striking distance of ARM. As Intel put it, Medfield buys the

You hear a lot about the relative pros and cons of the ARM and x86 architectures, and it is true that Qualcomm and ARM have more success with low power consumption. Until Medfield, no one was sure how much better- off those companies were compared to Intel. Now we can say that they had a four-year head start, since it took Intel that long after the launch of Atom to come up with a competitive mobile platform.

What happens in the next three years, though? Given that Medfield is competitive with currently-shipping ARM MSoCs, we have to look to the next generation. On the previous page, we suggested that ARM and Qualcomm face at least as significant of a challenge scaling performance up as Intel faces in scaling power down.

scaling performance up as Intel faces in scaling power down. We can be perhaps most objective

We can be perhaps most objective in looking at manufacturing technology. Intel has the best chip fabs in the industry, which allowed it to out-compete AMD during the K6 and K7 era, and maintain its position when AMD introduced the successful K8-era processors. Medfield is currently based on a 32 nm node and is already competitive with ARM-based solutions. Intel’s next move is to make a jump to 22 nm on a 3D FinFET design, representing two steps forward in process technology. Intel has never failed to execute with a fabrication process, and it will already have plenty of experience from its Ivy Bridge-based processors. If the company stays on track, it’s about 18 months ahead of the competition in manufacturing. As soon as the competition starts shipping 28 nm, Intel will follow with 22 nm, and it will be even longer before competing fabs can implement FinFET. This gives Intel another 20-30% improvement in power consumption over its current technology, while basically doubling density.

High-K/Metal Gate

ARM-based vendors are also in a race to enable MSoCS manufactured with high-K/metal gate technology. Besides Intel and Samsung, all of the other players are dependent on outside foundries like IBM, Globalfoundries, and TSMC. Samsung opens its foundries to other companies, so they’re on that list too.

Qualcomm signed on with Globalfoundries to manufacture its 28 nm MSoCs. Globalfoundries uses a “gate-first” high-k/metal gate 28 nm process. This is also what IBM and Samsung will be doing. They won’t attempt to make the switch to “gate-last” until 20 nm lithography is available. TSMC, the original foundry-for-hire (and the expected manufacturing partner for Apple’s A6) is going with a “gate-last” approach. Intel has always gone with a gate-last approach.

“Gate-first” and “gate-last” describe the way you implement modern high-k insulators with metal gates, and

“Gate-first” and “gate-last” describe the way you implement modern high-k insulators with metal gates, and the layman’s explanation is that we’re talking about a shift from pure silicon dioxide-based chips to those containing a different insulator called hafnium. In a gate-first design, you put the metal gate and hafnium components on the wafer before heating it, and in a gate-last design (like Intel’s) you do the replacement afterwards.

Gate-first buys you more density, which is great for performance, but it comes at the expense of yield. You have more failures in manufacturing. Gate-last is more reliable for manufacturing. But there are more restrictive design rules that you have to get around. Intel has been shipping high-k chips since its Penryn core in 2007. Globalfoundries didn’t successfully ship high-k chips until 2011.

Intel isn’t wrong for choosing gate-last. It has a proven track record with its Penryn, Nehalem, and Sandy Bridge architectures. Qualcomm may be wrong for choosing gate-first. Globalfoundries has a working gate-first process, used to manufacture AMD’s APUs. Unfortunately, as noted in AMD’s third quarter earnings report, yields weren’t as good as previously hoped, leading to lower-than-expected revenue growth.

hoped, leading to lower-than-expected revenue growth. 5. That's Two For Intel Importantly, TSMC’s decision

5. That's Two For Intel

Importantly, TSMC’s decision to go with gate-last is steeped in history, according to the company’s senior VP in charge of R&D. Part of the reason why gate-first manufacturing results in low yields is that you have to control threshold voltage carefully, since the N- and P-channels use the exact same metal. The semiconductor industry tried to carefully control the voltage this way two decades ago and found it very difficult. The gate-last approach doesn’t require the same control because the metal for the P channel is different than the metal for the N channel. You lose some density, but yields are a lot higher, and the easiest way to lose a fight is to not show up at all. It’s not trivial to switch a design from gate-first to gate-last. It requires additional redesign time. To that end, you can’t just change your order from Globalfoundries to TSMC by checking a different box on a form.

It seems that Qualcomm figured out it can’t get the yields it needs on a gate-first approach. At the 2010 International Electron Devices Meeting held in San Francisco, the company stated that it wouldn’t be using high-k/metal gate technology for the majority of its 28 nm products. This is a big disadvantage for Qualcomm.

Summary

Intel’s 32 nm high-k design (Medfield) is competing favorably against current 40/45 nm ARM-based CPUs.

In the next iteration of its product, Intel will jump from 32 nm to 22 nm FinFET, equivalent to two process jumps. Qualcomm is going from 45 nm to 28 nm (1.5 nodes). But it isn’t able to make a jump to high-K, translating to a loss of clock rate and a power consumption sacrifice. Apple and Nvidia are both expected to rely on TSMC for their next-generation chips. Apple will go from 45 nm to 28 nm high-k (1.5 nodes) and Nvidia will go from 40 nm to 28 nm high-k (1 node). With 28 nm high-k, both Apple and Nvidia should have extra performance compared to Qualcomm’s jump to 28 nm silicon.

performance compared to Qualcomm’s jump to 28 nm silicon. All things equal, Intel gets the biggest

All things equal, Intel gets the biggest boosts to power and performance from process technology advances. Qualcomm, gambling on gate-first 28 nm, would have enjoyed more chip density if yields were good enough. Now, though, it’s forced to back off and go with a silicon-dioxide 28 nm process.

But all things aren’t equal. In order to compete, Qualcomm has to roll out new tricks like out-of-order execution and an improved memory architecture. The company’s engineers are doing this for the first time with Krait. They have to be flawless in their execution. Intel, on the other hand, is already doing well with a relatively low-tech Atom that doesn’t incorporate any of the advancements seen from many, many years of designing x86 processors.

Of course, Intel’s process technology lead will continue moving forward. While everyone else tries catching up to the firm’s high-k/metal gate manufacturing, it has already publicly demoed Claremont, a Near-Threshold Voltage Processor that operates at less than 10 mW. Interestingly, this chip was built around the original Pentium core, much like the Atom.

So, Intel leads with regard to architectural challenges and on the manufacturing side. There’s just one more piece of the puzzle: graphics.

side. There’s just one more piece of the puzzle: graphics. 6. A History Of Mobile GPUs

6. A History Of Mobile GPUs

In 2011, the dominant players in mobile graphics were PowerVR and Qualcomm’s Adreno. Both trace their roots back to failed x86 gaming products.

PowerVR is the most prominent contender, as Intel, Apple, and even TI use its technology. Back in the 90s, Imagination Technologies (then known as VideoLogic) started working on an infinite planes, deferred renderer graphics chip with the assistance of NEC. The PowerVR architecture was the first consumer deferred renderer in which visible pixels were drawn and occluded, or covered pixels were thrown away. At that time, other graphics chips were drawing everything, even if the person on the other side of the screen would never see the rendered output. Thus, PowerVR made much better use of available memory bandwidth, and its effective fill rate was higher, too.

The problem with PowerVR was that its team was built by visionary mathematicians and engineers

The problem with PowerVR was that its team was built by visionary mathematicians and engineers without experience in chip-building and gaming. The original PowerVR PCX chip lacked bilinear filtering, which meant that buyers of the $300 graphics card saw the same pixelated textures as anyone gaming on the original PlayStation, rather than the smooth, bilinear-filtered images associated with the Nintendo 64 and 3Dfx graphics cards from the same time period. It wasn’t that bilinear filtering was a particularly challenging concept; it just wasn’t something that the engineers thought to include when they developed the chip. VideoLogic quickly came back with the PowerVR PCX2, which had a higher clock rate and bilinear filtering. Unfortunately, the PowerVR team wasn’t run by people with game development expertise. And as a result, they did not anticipate the need for src*dst texture blending. This was required for colored lighting—basically the effect needed for awesome explosions, laser beams, and alien-looking hallways. Again, that wasn’t any sort of technical challenge, but rather an issue of just not thinking about the need for this texture blending mode.

not thinking about the need for this texture blending mode. Everything was supposed to change with

Everything was supposed to change with PowerVR Series 2, the platform used for Sega’s Dreamcast. A PC equivalent could have been the most popular graphics chip in the industry. Unfortunately, VideoLogic ran into problem after problem with its chip design. It’d tape-out and get prototypes back, only to discover a fatal glitch somewhere. One of the last problems had to do with the Windows hardware mouse cursor. Again, that wasn’t an engineering challenge, but a mistake nonetheless. The failure of PowerVR Series 2 in the PC world was ultimately what caused the company to exit the high-performance market and focus on low-power designs. It did have a short run of Series 3 chips, which lacked a hardware transformation and lighting engine, and it saw some financial success by powering digital poker machines in casinos, where the magic of deferred rendering was immediate.

PowerVR then switched from a true graphics chip manufacturer to a designer, selling its efforts the same way as ARM. This was the smartest move it could have made because it meant concentrating on core competencies based on math and block design, rather than making sure the logic was laid out ideally for a physical product. Since the company’s original architecture from the late 90s was already engineered for multi-chip design, it has been easy for PowerVR to continue to grow and evolve into the superb platform it offers today.

Now, anyone who knows tech history will remember that BitBoys is one of those companies infamous for its vaporware. But products based on its technology really did exist. It’s a crazy story, actually, and we like telling crazy stories.

Everything starts back in 1991. In the early 90s, Finland was home to the demo scene, which is where programmers (many of whom were just high school kids) would get together and write software able to push computer hardware to its limit. The idea was to pull off visual effects so awesome that you couldn’t believe they were running on commodity components, and to pull that off so efficiently that the data would fit into an absurdly small file. These demos combined creativity, video and audio talent, and pure programming genius. Competitions included stuff like the best intro (with graphics and audio) in 4 KB of space, or the best 64 KB demo (you owe it to yourself to check this out). And then there was the best mega demo, which had no constraints. Think of it like Step-Up 2: The Streets, only with software engineers instead of dancers.

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Fourth place in combined demo competition at Assembly 2005

One of the most respected groups at the time was Future Crew, who took first place at the biggest competition of the time: Assembly. Mika Tuomi (also known as Trug) was one of the lead coders. He and his brother, along with their friends, started a company called BitBoys. At first, they just paid the bills with software development for local businesses. But when they tackled the Second Reality demo, they found their calling for 3D graphics.

Some connections and contacts were made and soon they were engineering a graphics chip known as the Pyramid3D for a company called TriTech. Most folks consider that to be the first piece of vaporware from BitBoys, but Pyramid3D did make it past the design stage. There are stacks of prototype boards out there, many in the wild, and the hardware was demoed at various Microsoft events. Development definitely took longer than expected, and there were multiple respins and failures. But, in the end, the product really existed. The problem was that TriTech also happened to make audio chips, which also happened to violate Cirrus Logic’s patents. TriTech lost a lawsuit and, in light of royalties owed, the company shut down before Pyramid3D could reach consumers.

Doh.

Of course, you can’t keep a demo coder down. So the BitBoys team regrouped and tried again. This time, they went to companies like Real3D (a spin-off of Lockheed, bought out by Intel), Rendition (bought out by Micron), Creative Labs (which ended up buying 3DLabs), ATI, Nvidia, and even Diamond Multimedia. No one wanted to work with them, so they decided they would do it on their own.

This was when they started working on Glaze3D, which promised amazing fill rate performance with 9 MB of embedded DRAM. The company got its first round of venture capital and selected Infineon as its manufacturing partner, owing to significant embedded DRAM expertise.

8. From High-End To Mobile Graphics Kaj Tuomi, Mika’s brother, started work on developing software

8. From High-End To Mobile Graphics

Kaj Tuomi, Mika’s brother, started work on developing software that would allow a programmer to code a unit in C and then have automated tools that converted into VHDL, which could then be used to make actual chips incorporating the design. Clock-accurate simulation capabilities let them build their chips in a software simulator before actually doing work. As the 3D graphics world changed, this meant it was easier for them to adapt. Glaze3D became Axe, and the promised performance was even higher.

And then BitBoys got screwed again.

was even higher. And then BitBoys got screwed again. This all happened back in 2001, during

This all happened back in 2001, during the first dot com crash. Memory prices were dropping quickly and Infineon, the only factory in the world that could manufacture Axe, was going to shut down its embedded DRAM unit. This meant that BitBoys had a functional chip that couldn’t be manufactured by anyone. (Incidentally, this is the same problem Qualcomm faces by gambling on a foundry with gate-first high-K). But Axe wasn’t vaporware either. A limited number of Axe chips were produced before the end of Infineon’s embedded DRAM business so that BitBoys could show venture capitalists what they were capable of doing.

You can’t keep a demo coder down.

The team started working on Hammer, which would have been a flagship PC graphics product. This proved to be a challenge for the small team because, in 2002, Nvidia had its GeForce 4 and ATI was selling its Radeon 9700/9800—some of the best products ever seen from the two companies. Somewhere along the way, Nokia approached them. They did a Finnish secret handshake and the BitBoys started working on a design for a mobile graphics chip. Thanks to Kaj’s early work with the C-based chip development system, they were able to quickly code a mobile GPU and export it to a FPGA, a programmable general-purpose chip. Even though it wasn’t actual silicon, performance was superb. BitBoys had found its niche.

By 2006, the company was purchased by ATI and driving the Imageon product line-up. After ATI and AMD merged, Imageon was sold off to Qualcomm in 2009, meaning about 50 employees were transferred from AMD Finland to Qualcomm Finland.

And that’s where Adreno comes from, built with legendary BitBoys technology. The Adreno 225 that’s going to be the used in the initial Krait CPU is supposed to beat the Apple A5 with its PowerVR SGX 543MP2 at high resolutions. Both PowerVR SGX 543MP2 and Adreno 225 are faster than Tegra 3’s graphics performance, through Nvidia insists that its investment in extra CPU power will prove more valuable in the long-run.

9. The Prestige So, on one hand, you have PowerVR with its proven track record

9. The Prestige

So, on one hand, you have PowerVR with its proven track record in Intel, Apple, and TI chips, and Qualcomm with its access to legends of the Finnish demo scene.

Only that’s the thing: Most of the key team from BitBoys left Qualcomm a year ago to start SIRU Innovations Oy.

SIRU Innovations Oy is a start-up that has been running in stealth mode for the past year. It claims to be developing a licensable low-power graphics IP core. You’ve probably never even heard of SIRU, which goes to show you the difference between technology journalists who like to follow companies and talk about the organization's expertise and those who follow the human talent.

expertise and those who follow the human talent. SIRU’s team is still flying low enough under

SIRU’s team is still flying low enough under the radar to the point where we don’t know who all of the members are. But brothers Mika and Kaj Tuomi are co-founders, along with Mikko Alho. Mikko, SIRU’s CEO, was the graphics processor hardware project manager for Qualcomm Finland. Importantly, although Mikko is in a management position, keeping things on-track with project planning, resourcing, design definition, day-to-day project leading, and project status reporting, he was doing the block design for BitBoys in the 90s, including the C- and RTL-model implementation. That means SIRU’s management is run by an engineer and not just a suit. Jarkko Makivaara, Qualcomm Finland’s former director of engineering, is also with SIRU. Jari Komppa, a senior engineer with Qualcomm Finland, is now with SIRU. He is a demo legend, winning first place at the Text Mode Demo Competition XI, first innovation, second theme in ludum dare 48 game design contest #4, second place at the Assembly99 3d-accelerated demo competition, first place at the Assembly98 demo competition, and first place at the Assembly96 demo competition. There are other engineers at SIRU as well, all from BitBoys.

So, the top graphics engineers who joined Qualcomm in 2009 and have almost a decade of experience working on mobile graphics haven’t been contributing exclusively to Qualcomm for roughly a year.

Remember that PowerVR’s missteps came from a lack of engineers able to anticipate the needs of software developers and users. That’s not a problem with SIRU, built with a cadre of demo coders, as well as former programmers from Fathammer, a game development studio.

Additionally, we all know that graphics hardware is only as good as its supporting software driver. Updated GPU drivers for the Adreno 205 were responsible for an almost-50% performance improvement. And that’s where the final piece of the puzzle comes together. The team at SIRU is filled with engineers who are legends and wizards with x86 technology, whose expertise in the early 90s with single-core, in-order execution CPUs remain unmatched. Do you think it’s still unusual that the Atom and Near Threshold Voltage Concept are built around the Pentium?

Can the Qualcomm Finland software team extract enough performance from the hardware, even in the absence of many of contributing members of the Adreno GPU team?

Oh wait; a lot of those guys are gone, too.

Marko Laiho, BitBoys’ chief software architect and a director of engineering with Qualcomm Finland left half a year ago to start another stealth start-up, Vire Labs.Joining him is Joonas Torkelli, the BitBoys product manager for handheld IP, who was the graphics software lead in Finland for Qualcomm, Jani Huhtanen, a senior staff engineer with Qualcomm with expertise in GPU drivers and 2D/3D graphics algorithms, and Jusso Heikkila as the Vire Labs’s lead Android developer.They even have Kari Malmber as their creative director, a graphic designer who was with the BitBoys team and most recently worked at Qualcomm Finland on 3D material for demos and designing mobile phone user interfaces.

With the exodus of several important players, there is no question that Qualcomm's graphics division was

dealt a big blow. Human talent that was once exclusive to Qualcomm is now found in two stealth start-ups that clearly intend to license their technology to as many customers as possible.

license their technology to as many customers as possible. Closing Thoughts There are exactly zero shipping

Closing Thoughts

There are exactly zero shipping Intel-based smartphones today. Qualcomm brought in $4.12 billion of revenue in Q4’ 2011. But things will change over the next three years the same way things changed for Kodak.

You have Qualcomm, which faces challenges on the manufacturing side due to gambling on gate-first high-k and now being forced to go with standard silicon, challenges on the CPU engineering side as it moves to a true out-of-order execution design, and challenges on the GPU side from losing a substantial amount of exclusive talent.

Then, you have Intel, which dominates manufacturing, has demonstrated a competitive 32 nm product before even tapping into out-of-order CPU designs, and the freedom to choose between PowerVR’s graphics technology, whatever emerges from SIRU, or perhaps even a future design derived from its own engineers.

I'm calling it right here: three years from now, Intel will overtake Qualcomm in the MSoC business. Discuss.

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Intel And Qualcomm: The Moment Of Truth Is Near

Disclosure: I am long INTC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Two great American companies are soon to engage in some "Bump and Rub," as they say in the racing world.

Intel (INTC) is the leading and largest true and pure play semiconductor manufacturer on the planet. Intel makes integrated circuits intended for computing applications at all levels.As such, the Intel strategy is simple: Supply the finest high technology computing products to all equipment manufacturers.

Qualcomm is the world largest fabless semiconductor company. The company specializes and virtually "owns" the baseband radio section in a large percentage of the dumb, feature and smart phone market. Qualcomm is also one of the leading suppliers of ARM (ARMH) based application processors to the smart phone and tablet market. Qualcomm buys their semiconductor products primarily from TSMC (TSM), and is beginning to use other foundries such as Samsung and Global Foundries, due to TSMC's inability to supply all of the Qualcomm product requirements. The IP (Intellectual Property) division of the company is about a third of revenue but produces nearly three quarters of the operating profit.

As a late starter, Intel has been at a disadvantage in two areas. Intel does not have a 4G LTE solution today and the company has been thought to be lagging in low power consumption of their x86 application processors. The 4G LTE solution is expected to be here by the end of the year. I would forgive Intel if the LTE debut was delayed until CES in early January. The power issue was never a real issue, since the single core Medfield was competitive with the best in class in real world applications. Intel is expected to announce a dual core Medfield SoC along with the LTE chip. I would expect the dual core Medfield will be tweaked for power so that it beats all competition on power consumption. The mule to carry these parts to a worldwide market is likely to be a Motorola/Google (GOOG) 4G LTE smart phone with features superior to the Apple (AAPL) iPhone and the best from Samsung.A perfect venue to announce such a smart phone would be the upcoming CES.

With Intel shipping a low power AP and 4G LTE solution, Qualcomm will be competing directly with the world's leading semiconductor producer with no functional or cost advantage.

Here's the problem for Qualcomm: Qualcomm generates 64% of revenue and about 25% of operating income from the sale of application processors and radio chips. The company generates 32% of revenue and 71% of

operating income from patent licenses and royalty payments. Qualcomm doesn't need the semiconductor division to be a very successful company.

To make matters worse for Qualcomm, the Intel parts will be made on fully depreciated 32nm production lines while the Qualcomm parts will be coming from a low yield, high cost TSMC fab. The Intel parts could sell to the end customers for a price that is below the Qualcomm cost from TSMC. To make matters even worse, if that is possible, Qualcomm will be able to see and know what is in store for them when Intel moves to a new Atom architecture SoC built on the 22nm Trigate process later in 2013.

Qualcomm will soldier on in order to see if TSMC can actually build anything on a planar 20nm process. This should be known by June of 2013. The chance of TSMC success is low due to the leakage problems with a

planar process at 20nm (that's why Intel moved to Trigate). TSMC talks about running a 16nm "finfet" process, but not until 2015. Even if successful, by that time, Intel will be ramping their 10nm node, so TSMC/Qualcomm will still be 1+ node behind and, therefore, significantly behind on speed performance and power performance, never to catch up.

So, after six months of "Rubing and Bumping," if TSMC is unable to deliver 20nm sometime in 2013, Qualcomm has a giant decision to make. That decision is whether to even stay in the semiconductor business or pull a Texas Instruments (TXN) and withdraw from the mobile business altogether. TI stopped leading edge process development at 65nm, deciding that competing with Intel just created financial nightmares. TI further decided that they, in combination with TSMC, would still be at an ultimate disadvantage with regard to Intel. Qualcomm could well make the decision to withdraw, since they would still retain a sweet IP business, and by the time the "Moment of Truth" arrived, Intel could have priced Qualcomm into a loss position on their fabless semiconductor operation.

The reverberations of such a decision would be violent and wide ranging. TSMC would instantly lose their largest fab customer. TSMC would then be faced with the same decision that Qualcomm was faced with.

Apple, if they had not already made the decision to move their fab business to Intel, would now be crystal clear on that issue.

With Qualcomm and TSMC gone, Apple at Intel, the Samsung Semiconductor division would find itself in big trouble. The Samsung smart phone division could well decide to use Intel for the brains in their products.

Within a year, Intel could go from "Zero to Hero" in the mobile semiconductor business.

Maybe this is what Morris Chang was thinking when he thought losing the process technology race to Intel was "horrible" to contemplate.

The move here is to buy Intel and sell Qualcomm.Also, owning the overpriced ARM Holdings would not lead to rocking chair money.

8/16/13

Intel Corporation (INTC): Intel And Qualcomm: The Moment Of Truth Is Near - Seeking Alpha

Comments(64)

Interesting scenario Russ. INTC longs like me would dearly wish (and expect) for it to come true.

Great article.

17 Dec 2012, 02:48 PM

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What total nonsense. Are you being paid by Intel to wear their fantasy glasses?

17 Dec 2012, 02:59 PM

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Sounds pretty reasonable to a retire software systems engineer that's long AAPL, Dell, HP, INTC, MSFT and NOK. Maybe you should change your glasses?

17 Dec 2012, 05:52 PM

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JeffreyHF -- either you are a young person or an Apple devotee. In either case, it doesn't seem like you have a good grasp of Intel's capabilities, R&D, fab plants, etc.

19 Dec 2012, 12:57 AM

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Techy46

enough to diversified his portfolio before a major market correct drives him back

into the work force along with 15 million other Obama unemployed. You should keep INTC. It is yielding 4.17% and still has upside until at least $25. You should dump the rest your tech holders and buy something in the commodities sector before interest rates begin to rise and eat your bank account.

A word of advice. A retired software engineer should be smart

12 Mar, 04:09 AM

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Most investors have forgotten about Intel's Infineon purchase, but Intel hasn't. Time and process will help Intel, so they will get stronger as time goes by.

17 Dec 2012, 03:00 PM

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Russ,

I believe fundamentally that Intel will easily pull ahead on the applications processor side of things (it is already at parity with the best w/ a 5 year old microarchitecture), but it is not clear how long it will take until the baseband side of things can really be on the same competitive level as Qualcomm. That is Intel's one and only "problem" in the space which, fortunately, will probably be solved by pumping money into the Infineon group that it acquired.

I do see that Intel is aggressively hiring for its communications group to build next generation LTE modems, and I suspect that the "6331" part listed on the roadmaps will feature an integrated baseband processor.

What I do not agree with you on is that TSMC will fall so behind in process tech that Qualcomm and other just give up. There will be other competitors to Intel in the mobile space in addition to semiconductors needed for other areas of the market (think GPUs from AMD/Nvidia, for instance). They will not have the best process tech, so Intel will own the high end, but there's still plenty of room for others, should they be willing to take the GM hit.

8/16/13

Intel Corporation (INTC): Intel And Qualcomm: The Moment Of Truth Is Near - Seeking Alpha

Anyway, great article, Russ.

17 Dec 2012, 03:02 PM

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Ashraf,L i k e 5 R e p l y Russ Fischer Comments (1409) I've always

I've always said that this struggle is only over the bleeding edge of semiconductor technology. I would estimate that to be about what Intel now has (~15% of $300 billion), plus another 15% for complex mobile, other communications and networking (Cisco, etc.), maybe even foundry for the no- competitive-threat FPGA guys. That still leaves 70% of the dollars and probably 85% of the wafers to be produced by someone else.

TI just gave up. They saw a far better future in analog that could be run in much less expensive fabs than in running billions of dollars into a contest that they

couldn't win. A little side deal

what he knows at TI

stuck at 28nm and above as long as it didn't lose money for TSMC or screw the end customers. TSMC will be around and thrive, but they could make a conscious decision to stop chasing Intel. Discrete GPUs will be the tiniest of

niches in a couple of years, and maybe 28nm will be just fine for that niche. Just last week, Otellini said the LTE modem and radio would be integrated on the AP chip OR in a multi chip module (most probable) or power management becomes impossible. I will watch what comes from CES this year with great interest.

Interesting the QCOM is doing the Keynote at CES this year up to steal their thunder?

Morris

Chang came from TI

He

learned

most of

BS

and everything

would be tickled pink being

Intel maybe set

17 Dec 2012, 04:54 PM

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Qualcomm will not lay down so easily. While they may lose TSMC as a viable foundry, they still will have the option to use an IBM alliance foundry like Global or Samsung, or the shared Fab in New York.

17 Dec 2012, 06:34 PM

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fidgewinkle

"While they may lose TSMC as a viable foundry, they still will have the option to use an IBM alliance foundry like Global or Samsung, or the shared Fab in New York."

Global Foundries uses IBM's process and they have suffered worse yield problems than TSMC. There is no assurance whatsoever that either IBM and it's licensees, or TSMC will deliver on the next process generation on time or if at all. Schedules come from the Marketing department, not the process development people.

17 Dec 2012, 06:55 PM

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L i k e 2 R e p l y Russ Fischer Comments (1409) fidge, GF

fidge,

GF is so bad that AMD "sold" their residual interest in GF (which was the AMD fab, so AMD knew what the capabilities were), in this case "sold" means that AMD sent GF $300+ million AND their shares in order to get out of a commitment to take wafers from GF.

For AMD to do that just screeches that GF is garbage way.

Intel and TSMC were the only two companies to NOT use the IBM gate first

process

better stick to 45-65nm stuff.

and likely to stay that

and

that was because TSMC copied Intel. I would say that IBM, et al

18 Dec 2012, 12:05 AM

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8/16/13

Intel Corporation (INTC): Intel And Qualcomm: The Moment Of Truth Is Near - Seeking Alpha

And Qualcomm: The Moment Of Truth Is Near - Seeking Alpha Yes, GF is not very
And Qualcomm: The Moment Of Truth Is Near - Seeking Alpha Yes, GF is not very
And Qualcomm: The Moment Of Truth Is Near - Seeking Alpha Yes, GF is not very

Yes, GF is not very good, but Samsung is IBM process as well, and are doing just fine. More importantly, looking at performance characteristics, IBM alliance technology is the only one competitive with Intel.

18 Dec 2012, 03:49 AM

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Qualcomm provides a IP Core solution, an entire multimedia Android or Feature phone, to the phone makers, ready to customize, a complete hardware/software solution. Intel has not traditionally provided a total solution, i.e. they don't (single- handedly) make a complete PC with working operating system, with all drivers, ready to customize, let alone, a complete phone that is ready to customize. Intel has traditionally been dependent on outside software vendors. This is something to consider very carefully when reading this article.

17 Dec 2012, 03:02 PM

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systemBuilder

You are mistaken. The Lava "Xolo 900" and other phones are based on Intel's Form Factor Reference design. This phone was completely designed by Intel. Further, Intel did a lot of the software/optimization work to get Android working well on X86. The work they did with binary translation was nothing short of amazing.

Intel is quite advanced on the software side of this equation.

17 Dec 2012, 03:07 PM

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Ashraf: "Intel is quite advanced on the software side of this equation."

This is so true! And it explains why they win some benchmarks over Cortex-A9 or Qualcomm S4 SoCs. Medfield performance is not that good, but Intel did a tremendous work on Android that makes it look good.

18

Dec 2012, 03:51 AM

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R e p l y AlphaSeeker2 Comments (7)     The Intel victory ma y not

The Intel victory may not be this decisive, but it’s coming.

 

17

Dec 2012, 03:30 PM

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Complete wrong assumption.

The ecosystem for the mobile devices is ARM, period. No company is interested in x86 platform for the mobile devices due the failure in the last a couple of years. Last year, Leveno was talking about x86 phone. Where is it now ? It is stopped because Leveno forsee there is no demand.

The most important part is the ecosystem. Performance or power consumption is no longer that important these days unless Intel can come up something that's 2-3 times faster for the same power consumption. I seriously doubt.

Anyhow, the days for Intel high margin is gradually gone. Nvidia, QCOM, Samsung and Apple and even Chinesee company Huawei all are interested in get into server market beside the mobile space. Intel used to be able to make 60-80% margin on its high end server CPU. Everyone is eyeing on that business. In the past no one can challenge x86 ecosystem. These few years mobile devices booming make ARM to be a good alternative platform. Be really careful if you are long on INTC.

17 Dec 2012, 03:54 PM

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User,

8/16/13

Intel Corporation (INTC): Intel And Qualcomm: The Moment Of Truth Is Near - Seeking Alpha

I'm long INTC and like the picture painted in the article, but kinda agree with the caveats you raise. First, the smart phone ecosystem is overwhelmingly ARM- based. Even with the best combination of process, design, and costs, the ecosystem represents inertia. Intel will need to build and maintain a lead for a couple years to change it.

Second, Intel will not be able to maintain its current margins in this business. It may increase revenue and earnings, and there may be derivative benefits to other parts of the business, but it's hard to see how they'd maintain 55% margins selling silicon into phones.

17

Dec 2012, 07:41 PM

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e p l y lotus position Comments (181)     I don ' t know but

I don't know but here it says Lenovo will be the market leader in China:

17

Dec 2012, 09:04 PM

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i k e 1 R e p l y Russ Fischer Comments (1409) treyanas, Why would

treyanas,

Why would you EVER think that Intel will not be able to maintain margins in the mobile business? Take the Apple A6 for example. The chip is 97 mm^2. With a new 32nm process at Samsung, still in a learning curve, the yield is probably 250 good parts per wafer. That wafer at Samsung has a cost of about $5000 including depreciation. That pretty close to a $20 part at cost. Samsung knows they have Apple by the soft parts, so they would have to be dumb as a box of rocks to

sell that wafer for anything under $10,000

part costs ~$20 and sells for $40-60. Don't believe the BS from iSuppli about a $27 chip. They are very wrong. If intel made the same part with no changes on a fully depreciated, high yielding 32nm line, they would yield about 400 good parts on a wafer that cost $3000 (no depreciation). That's $7.50 cost. Intel selling the part for $25 would get 70% gross margins. Imagine for a minute that same part built on a 22nm line. We would be back to $5000 wafers (damn depreciation). The chip size would go to about 50mm^2 and the yield would be much higher just due to smaller die size. About 800 good parts per wafer would make the cost ~$6.25. Selling that part at the current Samsung cost of $20 would give Intel a 69% margin. This low margin mobile chip thing is just a crock. Even today a chip from TSMC with a $5 cost sells to the fabless guy for a 50% margin or $10. Maybe the fabless guy can get 40% margin or $16.66. The overall margin from TSMC to the end customer is 70%.

and

probably $15,000. So the A6

18 Dec 2012, 12:53 AM

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A Value Comparison Between Intel And Qualcomm

Disclosure: I am long AAPL, INTC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Intel (INTC) stock has had a rough time of late, falling over 16% year to date and over 30% from its 52-week high of $29.27 set earlier this year. On top of that, Paul Otellini announced that he will be stepping down as CEO next year, creating even more uncertainty among shareholders. This all comes as the company faces intense pressure in its chip business from the mobile and tablet markets. Qualcomm (QCOM), which recently took away Intel's position as the world's largest chip maker, is leading the way with its smartphone chips. Qualcomm chips are in basically all mobile devices, ranging from the Google's (GOOG) Droid RAZR M to Nokia's (NOK) and Microsoft's (MSFT) Lumia 920.

This loss in market share has resulted in a contracting of margins for Intel. Intel's margins, which used to be as high as 65%, are now averaging 55%.As more and more consumers make the move to mobile devices, PC sales will continue to decrease, which ultimately has negative effects on the overall revenue that Intel can realize. Qualcomm, on the other hand, currently is in a perfect position to capitalize on this move to mobile devices, and consequently has seen its margins continue to expand.

Even though it already seems clear that Intel is not adapting to the times, it is rumored that the company is proposing the idea of supporting Apple (AAPL) with all of its ARM chips. With tensions currently high between Apple and Samsung Electronics Co., Intel is hoping to capitalize on this opportunity to increase overall market share and gain penetration into the mobile market. Unfortunately, the overall consensus from the analyst community is that the total impact to Intel's bottom line would be minimal.

In a Morgan Stanley report released Monday, the analysts wrote that with strains in the relationship between Apple and Samsung, recent media speculation has been that they could win some business making ARM chips for Apple. We analyzed the opportunity with some key questions/assumptions about profitability, and conclude the impact is likely "small." The report goes on to estimate that the total financial impact that Intel could possibly receive if this deal did indeed go through would be about $1.7 billion, with 12.5% in operating margin.

As Intel works to begin making and selling chips in the mobile market, Qualcomm is working to increase its exposure in other markets. Last week, it was announced that Qualcomm planned to acquire a 5% stake in electronics maker Sharp, Inc. Sharp, which has been experiencing heavy losses in its electronics sector, has been looking for a large capital infusion to help repair its cash-strapped balance sheet. The deal with Qualcomm would allow the two to start working on developing energy-efficient LCD panels for smartphones using Sharp technology.

Both Intel and Qualcomm currently trade at very god valuations, but they represent two different types of stocks. Intel is an extremely large company with a market cap of $100 billion and trades for around 9 times earnings. The stock, at current levels, is yielding about 4.40% and has a book value of $9.89 per share. In my opinion, Intel is the true representation of a value stock.

Qualcomm, on the other hand, has a market cap of $109 billion and trades for around 21 times earnings.At current levels, the stock is yielding about 1.55% and has a book value of $19.65 per share. I think it is also important to mention that Qualcomm, unlike Intel, has no debt on its balance sheet. This gives the company a

great deal of flexibility to expand operations or buy back stock/increase its dividend. I would classify Qualcomm as a classic example of technology growth stock.

The table below compares Intel and Qualcomm against several metrics that I feel are important when trying to assess which company is not only the stronger of the two, but also the better value.

 

Intel

Qualcomm

Stock Price

$20.65

$64.33

Book Value

$9.88

$19.65

P/E

9.05

21.01

Forward P/E

7.67

13.51

EPS

2.29

3.06

Market Cap

102.75 B

109.65 B

Current Dividend Rate

4.4%

1.55%

Annual Revenue

$54 B

$19.12 B

Cash on Balance Sheet

$16.99 B

$26.83 B

Long-Term Debt

$7.1 B

$0

Net Profit Margin

22.90%

25.44%

Intel is clearly the company that is late to the mobile chip party, but the bigger question regarding Intel's future is whether the company will take a path similar to that of Yahoo (YHOO). Ideally, this is where the company hires someone from the outside with experience and innovative ideas that will reinvent the company and push it to be more competitive. The other option is for the company to continue down its current path and stick to what it has traditionally done. By not moving forward with a new product line, the company would be taking a path very similar to that of Hewlett-Packard (HPQ), thus costing the shareholders a lot.

After examining both possible options, the fact that Intel's CEO himself has stated that the board is considering an outside hire and the fact that Intel has already approached Apple to move into that market, I am inclined to believe that Intel will choose to be innovative and progressive. That said, when looking at the above two firms I am more prone to be a buyer of Intel vs. Qualcomm.At first glance, that logic might not make the most sense, but there are several reasons why I like Intel better and believe that it is the better overall choice and value.

When doing a value comparison Intel is the clear winner from a consistent growth approach, current and future valuation, and dividend growth. I am sure that the arguments against this are that Intel currently is representing a value trap. I understand that logic and argument, but don't necessarily agree. Based on next year's EPS estimate of $2.69 per share, I feel that the stock has already put in a bottom for the year and should not go much lower than $18 per share.and believe that it is the better overall choice and value. I feel that Intel also

I feel that Intel also beats Qualcomm from a steady and consistent growth standpoint. Intel has consistently beaten both its revenue and EPS numbers by 4.5%-6% each quarter for the past several quarters. Now, I will be the first to say that Qualcomm has posted some spectacular numbers and has beat its revenue targets in excess of 20% in several of the past quarters, but during last June's quarter it missed EPS estimates by 1.20%.Also, throughout this past year Qualcomm has been continually lowering its overall guidance below analysts' original estimates.As a growth stock, Qualcomm isper share, I feel that the stock has already put in a bottom for the year

inconsistent and tends to be much more volatile, making it very hard to assess a real valuation for the stock and to avoid overpaying.

Due to the fact that Intel is more of a typical value stock, the type of funds and individuals that own the stock are interested in owning the stock for the long term and are not as motivated to sell based on day-to-day fluctuations. This type of mentality creates a strong base in the stock price and creates consistency in pricing. Now, with Qualcomm being more of a growth stock, the type of investor and fund that buy this stock are more interested in short-term bursts (up or down) and are more apt to sell quicker, creating more volatility and less consistency.a real valuation for the stock and to avoid overpaying. One of the main reasons why

One of the main reasons why I like Intel better than Qualcomm is the old notion of "buying when there is blood in the streets." Intel has gotten kicked down and is widely hated among the analyst community. Current price targets on the stock range from $15-$21 per share. In my opinion, it won't take a lot for Intel to do something that exceeds the market's expectations and ultimately result in a huge run-up in the share price. Qualcomm, on the other hand, has a lot to live up to and expectations are already quite high. In the case of Qualcomm, it will only take a slight miss or a little bit of bad news for the stock to sell off and correct down.sell quicker, creating more volatility and less consistency. Qualcomm was surely first to the mobile chip

Qualcomm was surely first to the mobile chip party, but with such high expectations for it I feel as if there is greater risk in owning Qualcomm over the long run vs. Intel. Ultimately, with the amount of potential bad news that is already baked into Intel, the chance of increased value coming from even a minor amount of good news will be much higher than that of Qualcomm.

Qualcomm vs. Intel: Challenger Starts Major Push To Be No. 1

By David Zielenziger

It doesn't look like a mistake: In the fourth quarter of 2012, the market value of Qualcomm Inc. (NASDAQ:QCOM), the No. 1 designer of mobile chips, exceeded that of Intel Corp. (NASDAQ:INTC), the No. 1 chipmaker, for the first time.

At the close of Wednesday trading, Qualcomm, of San Diego, was valued at $110.6 billion, about $3.5 billion more than Intel, of Santa Clara, Calif., the company whose explosive growth will be forever linked to the era of the PC.

Former Intel CEO and Chairman Gordon E. Moore, a legendary electrical engineer, is the inventor of “Moore’s Law,” which stipulates the power of a microprocessor doubles roughly every 18 months. His successor, Andrew S. Grove, a legendary chemical engineer, ran the business with the mantra, “Only the paranoid survive,” which became the title of his memoir.

Now, Qualcomm looks to be ascending while Intel appears descending. On Monday night, CEO Paul E. Jacobs, 50, gave the keynote address at the International Consumer Electronics Show, during which he unveiled the second generation of Qualcomm’s Snapdragon processor, which has been designed into hundreds of mobile products, from smartphones to ultralight laptops, mainly from Asian manufacturers, including Lenovo Group (PINK:LNVGY), the No. PC maker that's also moving into smartphones.

Since Apple (NASDAQ:AAPL) first started selling the iPhone in 2007, there’s been a Qualcomm chip inside, too. Ditto for the iPad and the newer iPad Mini series.

Last year, Intel CEO Paul Otellini, gave a keynote in which he hailed the Ultrabook series of ultralight chips, which shipped late in 2012. So far, they haven’t made much of a dent in Intel’s performance. Moreover, Otellini, 62, announced his sudden retirement this year, leaving Intel without a designated successor.

To be sure, Qualcomm’s Jacobs had it easier: His father, Irwin, now 79, founded the company in 1985. Irwin Jacobs, a professor of electrical engineering, founded Linkabit, a forerunner of what’s now M/A-Com Technology Solutions Holdings (NASDAQ:MTSI), in 1968.

The younger Jacobs, who has a doctorate in electrical engineering and computer science from the University of California, Berkeley, started out designing mobile chips at Qualcomm not long after Irwin started it.

From the start, Qualcomm exploited high-growth markets in mobile communications, just as the technology got deployed in the U.S. after successful launches in Europe and Asia. Qualcomm essentially invented the CDMA standard that was the foundation of the major U.S. networks headed by Verizon Wireless, majority owned by Verizon Communications Inc. (NYSE:VZ).

Unlike Intel, the company kept its capital costs low by not building its own semiconductor plants. That meant close contacts with Asian manufacturers such as Samsung Electronics (KSX:005930) and Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) that helped with market intelligence.

With hindsight, it may have been those connections that allowed Qualcomm to ride the shift to mobile platforms that become apparent last year and is expected in surge in 2013 and beyond. In 1999, Jacobs Sr. pushed the company out of marketing its own mobile phones, when it couldn’t keep up with competition from Nokia Oyj (NYSE:NOK), the old Motorola Inc. and Ericsson (NYSE:ERIC).

So for more than a decade, Qualcomm has concentrated solely on designing new products, selling the chips as well as licenses. Jacobs Jr. took over as CEO in July 2005.

Since then, shares of Qualcomm have gained more than 90 percent. By contrast, in the same period, shares of Intel have lost 19.2 percent. It's probably no accident that of the 45 analysts who cover the company, 40 have either "strong buy" or "buy" recommendations on the shares.

Despite its huge patent portfolio, the chip designer under Paul Jacobs has also moved shrewdly. It has strong licensing deals with ARM Holdings (NASDAQ:ARMH) of the UK, another crucial Apple mobile partner. In May 2011, Qualcomm paid $3.1 billion to acquire Atheros Communications, another fabless chip designer, which had innovative designs for tablets and the so-called “smart home.”

Qualcomm continues to generate a torrent of cash, too. In the fourth quarter ended Sept. 30, cash and investments were $26.84 billion, compared with $20.9 billion a year earlier. Net earnings rose to 89 cents a share from 80 cents a year earlier as revenue jumped 13 percent to $4.87 billion.

“Pretty soon, mobile connections are going to outnumber us,” Jacobs said at CES on Monday, noting there are at least 6.4 billion mobile connections worldwide, about the same as the global population.

Not only will wireless connections speed communications and entertainment, he said, they’ll also be the heart of a revolution in medicine, where patients have pacemakers communicating directly with the physicians, or consumers working out on the treadmill will be able to send their daily workout results to the cloud.

Qualcomm looks as if it will be riding the new wave. Can Intel catch up?

Why Qualcomm picked Taiwan over U.S.

By Jeffry Bartash, MarketWatch

WASHINGTON (MarketWatch) — When Qualcomm looked to build a multi-billion-dollar chipmaking plant several years ago, a bunch of countries offered incentives to win over the San Diego-based company.

The United States?

“Nothing,” said Greg Farmer, the company’s vice president of government affairs.

Qualcomm (NASDAQ:QCOM) , whose chips are used in millions of cell phones, built the plant in Taiwan instead. The U.S. lost out on a number of jobs.

The failure of the U.S. to exert its weight in the fierce global competition for business is all too common, executives say. The federal government does very little to promote business development in the U.S. — either by domestic or foreign companies — and some of its policies in areas such as corporate taxes and immigration drive entrepreneurs away.

High-tech and other U.S. companies are heavily wooed by foreign countries. The U.S.? Not so much.

In an era of stubbornly high U.S. unemployment and lackluster growth, a rising number of business leaders and some government officials say that’s got to change. They believe there needs to be more cooperation between the government and private sector or more businesses will go elsewhere.

Other countries, they say, are rolling out the red carpet much more than the United States.

“There is very intense competition for business and investment around the globe,” said Jennifer Daniels, general counsel at Georgia-based NCR Corp. (NYSE:NCR) , one of the nation’s oldest multinational companies. NCR does business in 100 countries and has a front-row seat.

Race is on

So what can the U.S. do? Top executives aren’t suggesting the sort of intimate collaboration that exists, say, among business, labor and government leaders in Germany. But there are a lot of things that can help.

Most of what’s on the corporate wish list is nothing new. Lower business taxes. Reformed immigration laws that allow the best and brightest from around the world to stay in the U.S. Permanent tax breaks for research and development. More federal grants for lab research.

What’s new is the urgency. The U.S. has to start changing — and fast — or the world’s largest economy will increasingly lose out to upstart nations that do a better job wooing international business.

/conga/story/misc/dc.html 275546

“The race today is not between Mississippi and New York. It’s between the United States and other countries,” said Robert Atkinson, president of Information Technology & Innovation Foundation.

Atkinson has long been a proselytizer in Washington on how the U.S. can become more innovative and boost job creation. He’s constantly bringing political leaders, business executives and academics together to try to find common ground to make the economy more competitive.

Open borders

Immigration reform — the subject of a major push in Congress — is one hot-button issue. Executives have

complained for years about the unwillingness of the government to let more foreign-born students who study

in the U.S. to stay after their visas run out. Read: CEOs see light at end of immigration tunnel.

Foreign-born students, who tend to outshine Americans in math and science, have long been known for their propensity to start successful businesses that eventually become job engines.Yet relatively few are allowed to remain in the U.S.

Unions take a close look at immigration overhaul

Organized labor is throwing its muscle behind an immigration overhaul, in a bet that unionizing more immigrant workers can minimize overall declines in union membership. WSJ's Melanie Trottman joins The News Hub with the latest. Photo:AP.

That’s growing problem. One major study says more than 40% of the Fortune 500 companies in 2010 were founded by immigrants or their children. The U.S. is losing out on a major source of economic dynamism by keeping the entry gate high for the best-educated from abroad. Read report on immigrant contributions to U.S. economy.

A high-ranking Commerce Department official, Francisco Sanchez, likes to tell a story of an Indian-born

student who attended an Ivy League college The student had a promising business plan and investors lined up, but his visa ran out and he had to go home.

Back in India he started the business and now employs more than 2,000 people. Those are jobs that could have been created in the U.S.

“We at the federal level have done very little to face the global competition,” Sanchez said.

The Commerce Department has kick-started the very first federal effort with the creation of the SelectUSA, a young program designed to make it easier for companies to set up shop in the United States.

Yet Washington remains far behind all 50 states, each of which has its own business-recruitment agency.And while many are very aggressive and successful, states aren’t always equipped to take the lead on huge investments like the Qualcomm chipmaking plant.

Tax man goeth

Tax reform, of course, is clearly item No. 1 on the agenda of business.At 35%, the U.S. has one of the highest corporate tax rates among the world’s richest countries. It’s also one of the few nations that taxes what a domestic company earns both at home and abroad.

Now it’s true many U.S. companies don’t pay the full corporate rate. Loopholes and exemptions can significantly lower the effective rate — what companies actually pay in taxes. Nor is the burden equally shared between companies and industries. Some pay a lot less than others.

What really galls executives, though, is the global tax system. Washington taxes what a company earns on its business in the U.S. and what it earns via operations in other countries.

Foreign-based American operations are also taxed by the country in which the U.S. business is located, so it’s

a double whammy.

By contrast, France only taxes what a French company earns at home, not what it earns in the U.S. or Canada or China. Such a “territorial” tax system is used by virtually every nation that competes hard with the U.S.

American companies can get around double taxation by leaving profits from foreign operations parked overseas — but that does nothing for the U.S. economy.

All that cash could be put to better use at home, executives say. Companies could use it to invest in new businesses or hire new workers, though past studies show they mostly use the proceeds to pay shareholders.

Still, more money circulating in the U.S. economy is a good thing.

Had a territorial tax system been in place a few years ago, Qualcomm’s Farmer said the company would have given greater thought to building its new chipmaking plant in the United States. Taiwan still may have won out, but the U.S. would have been a more serious contender if Qualcomm didn’t have to pay a 35% tax to bring surplus cash home from overseas.

Deep suspicions

Getting tax reform though a divided Washington, however, won’t be easy.And more government efforts to partner with business could unsettle both the left and right.

Republicans blast President Obama’s support for the green-energy industry — think of bankrupt Solyndra — as a waste of money and they accuse the White House of trying to pick winners or losers. That’s a big no-no to conservatives.

Liberals, for their part, are deeply suspicious of business.

“Is there any possible way we can help the economy without helping business,” an unnamed senator reportedly asked Atkinson not too long ago after he gave a presentation to Democrats at a party retreat.

Atkinson tells the story with a chuckle, but he knows the U.S. has to do a lot more to promote competitiveness on an enlarged global playing field.

“Other countries are not just sitting around waiting for companies to knock on the door,” he noted.

Intel And Qualcomm Are Both Winners

Disclosure: I am long INTC, QCOM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Intel Corporation (INTC) is the largest chipmaker in the world. Qualcomm Inc. (QCOM) designs, develops, manufactures, and markets digital telecommunications products and services, including developing and licensing wireless technology and manufacturing semiconductors for mobile phones. This article will provide the recent developments for both companies and show why both are winners.

Intel Corporation

Intel had gone ex-dividend on February 5, 2013 with a cash payment of $0.225 per share, payable on March 1, 2013. INTC closed at $21.18 with 1.16% gain on February 5, 2013. INTC is currently offering 4.25% annual dividend yield.

New Chips

For the mobile offering, Intel is expected to bring out a new version of Atom (formerly "Lexington"), which uses less power. The new value offering includes the Intel Atom processor Z2420 with Intel Hyper-Threading technology. For smartphones, Intel Atom Z2580 processor platform (formerly "Clover Trial+") will include a dual core Atom processor with Intel Hyper-Threading technology, as well as a dual-core graphics engine. The new platform will deliver up to two times the performance benefits over Intel's current-generation solution (Intel Atom processor Z2460 platform), while also offering competitive power and battery life. For tablets, the next- generation 22nm Atom SoC, "Bay Trail," will be available for the 2013 holiday. The first quad-core Atom SoC will deliver two times the computing performance of Intel's current offering. For Ultrabook, Intel is expected to deliver the 4th generation core processors, the first Intel chips which are built from the ground up with the Ultrabook in mind.

Expansion into Mobile

Intel is attempting to get its processors into mobile phones by joining PC maker Acer Inc. in Bangkok to unveil the Liquid C1 smartphone, running Google Inc. (GOOG)'s Android operating system. This smartphone will be launched in Thailand and rolled out across Southeast Asia, as reported by Reuters.After Paul Otellini's departure, mobile and emerging markets will become major focuses for the new chief executive.

Concerns

Intel is still facing weak sales of PCs, where the revenue growth from PC had been declining steadily since 2009. This is an on-going concern for Intel investors for a while and Intel's share price should have reflected the declining PC market.

Qualcomm Inc.

QCOM reported a 36% surge for its Q1 profit due to strong demand from smartphone manufacturers. QCOM beat the estimates and raised its full-year guidance to $4.25-$4.45 on revenue of $23.4B-$24.4B for 2013. QCOM continues to benefit from increasing population of smartphones and the demand for next-generation

wireless technology LTE. QCOM also benefited from the trend for larger display for smartphones. Bernstein analyst Stacy Rasgon said the outlook was "massively conservative" compared with his estimate of actual growth prospects. However, given the economic environment, it makes sense to be cautious.

New Processors

QCOM is delivering new Snapdragon 800 and 600 processors. The new Qualcomm Snapdragon 800 processors will deliver up to 75 percent better performance than the Qualcomm Snapdragon S4 Pro processor with exceptionally low power. The Qualcomm Snapdragon 600 processor is delivering up to 40 percent better performance than the Qualcomm Snapdragon S4 Pro processor at lower power. The Qualcomm Snapdragon 600 processor features a new Krait 300 quad-core CPU with speeds up to 1.9GHz, a new speed enhanced Adreno 320 GPU and support for LPDDR3 memory. The Qualcomm Snapdragon 600 processor is expected to be available in commercial devices by the second quarter 2013.

Concerns

Competitions are growing while Intel is catching up to the mobile segment and Broadcom (BRCM) is seeking to increase its content on popular devices, as wrote by Mark Sue, an analyst at RBC Capital Markets. QCOM might be also negatively impact as Apple Inc. (AAPL) and Samsung (SSNLF.PK) continue to work on their own app- processor and Huawi and MediaTek also accelerate their internal developments. Nonetheless, analysts expect

QCOM to hold its strong position. Citigroup raised its price target for QCOM with a buy rating on January 31,

2013.

Fundamental Comparison

 

Intel Corporation

Qualcomm Inc.

Who leads?

Enterprise Value

$101.40B

$101.41B

Almost Identical

Revenue

$53.34B

$20.46B

INTC

Quarterly Revenue Growth (yoy)

-3.00%

28.60%

QCOM

Profit Margin, ttm

20.63%

32.33%

QCOM

Return on Equity

22.66%

18.12%

INTC

Total Cash

$18.16B

$13.28B

INTC

Total Debt

$13.45B

$31.00M

QCOM

Total Debt to Equity, mrq

26.26

0.09

QCOM

Dividend Yield

4.25%

1.52%

INTC

YTD Performance

+2.62%

+6.11%

QCOM

Source: Yahoo! Finance on February 1, 2013

How to Invest

INTC provides a great value with a very low P/E of 9.3, as compared to the industry average of 21.2. With its strong cash flow and solid dividend, INTC is a good candidate for short covered call option strategy. QCOM provides strong growth with promising outlooks. QCOM is a great long-term holding with buy-and-hold strategy for its stocks. For options investors, a credit put spread can be considered to gain credit premiums while having the potential to acquire the stock at a lower price.

Note: Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.

Analyst: Intel Atom chip outperforms Nvidia, Qualcomm and Samsung

Analysts at ABI Research report that Intel’s latest Atom processor - the Z2580 clocked at 2.0 GHz - sets the bar for performance and current drain in smartphones.

"It outperformed the competition in ABI Research’s benchmark testing of the Lenovo K900 smartphone, powered by Intel’s XMM6360 modem chipset and Z2580 application processor," confirmed Jim Mielke, VP of engineering at ABI research.

"The benchmarks were impressive but the real surprise was the current consumption recorded during the benchmarks; the new processor not only outperformed the competition in performance but it did so with up to half the current drain."

According to Mielke, for the CPU part of the benchmark test, three phones scored in the 5000 range for performance, but of the three, Intel stood out with only 0.85A of average current vs. 1.38A for the Samsung Exynos Octa, and 1.79A for the Qualcomm APQ8064T.

"Similar trends are seen for each test. If one of the chips did have lower current, the performance was significantly lower or if the performance was better, the current was higher," Mielke continued. "The only test where a competitor matched the performance of the Intel Z2580 was for 1080p video record."

Meanwhile, the Samsung Galaxy S4 i377 had lower current drain which ABI attributed to a separate image processor from Fujitsu, rather than the Qualcomm APQ8064T. The Samsung Exynos Octa performed well without a separate image processor in both the 1080p and 3D graphics tests; outscoring all but with proportionally higher current compared to the Z2580 from Intel.

"Intel did significant work to bring the current drain down on their well-recognized high-performance processors but the competitors did not help themselves. The ARM architecture used by nearly all of Intel’s competitors is well known for its low power performance but in bringing the processing power up closer to PC levels, the current drain has taken a significant hit," Mielke added.

"Since high-end smartphones require this level of performance, Intel is well positioned for strong growth over the next few years Combining the high-end modems (the XMM6360 is used in both the Lenovo K900 and the Samsung Galaxy S4 i9500) with their application processors for high-to mid-tier solutions, and single-chip EDGE chips for low-cost phones makes Intel a rare full portfolio provider."

Intel Dominates Over Samsung, Qualcomm and Nvidia Processors, Haswell Processor Delivers Its Promise

Intel's Z2580 application processor, also known as CloverTrail before launching, defeated other leading processors in a benchmarking exercise. Intel outperformed competitors like Qualcomm, Nvidia and Samsung in a test according to Allied Business Intelligence Inc.Allied Business is affiliated with ABI Research.

ABI Research revealed that Intel Corp. processor is the best in reducing power consumption in smartphones. It is now a top player and lower compared to equivalents based on the ARM architecture licensed from ARM Holdings plc. This type of performance is necessary for high-end smartphones running many applications.

According to ABI, the company is "well positioned for strong growth over the next few years." The benchmark exercise involved comparing the performances smartphones. These included Lenovo K900 smartphone running on by Intel's Z2580 application processor and supporting XMM6360 chipset.A set of smartphones from Samsung were also tested. They run on ARM-based application processors by Nvidia. Qualcomm was also included.

"The benchmarks were impressive but the real surprise was the current consumption recorded during the benchmarks; the new processor not only outperformed the competition in performance but it did so with up to half the current drain," Jim Mielke, vice president of engineering at ABI research, was quoted in a statement. "Intel did significant work to bring the current drain down on their well-recognized high-performance processors but the competitors did not help themselves. The ARM architecture used by nearly all of Intel's competitors is well known for its low power performance but in bringing the processing power up closer to PC levels, the current drain has taken a significant hit," he added. "Combining the high-end modems - the XMM6360 is used in both the Lenovo K900 and the Samsung Galaxy S4 i9500 - with their application processors for high- to mid-tier solutions and single-chip EDGE chips for low-cost phones makes Intel a rare full portfolio provider."

On the other side of the market, Intel's Haswell is receiving great reviews for its performance.

To contact the editor, e-mail: editor@ibtimes.com

People visit the Intel booth at the 2013 Computex exhibition at the TWTC Nangang exhibition hall in Taipei June 4, 2013. (Credit: Reuters)

It's not an ARM Market, it's a Qualcomm Market

Andy Patrizio

No wonder Qualcomm is clobbering Intel in mobile. It's using the Intel playbook.

ARM has 100 licensees but one, Qualcomm, is the company that's giving Intel fits. Here's why.

Image credit: flickr/jontintinjordan

Intel is enjoying some good news in the mobile space for once. Its Atom processor now powers Samsung's Galaxy Tab 10.3 tablet. Ok, that's one device. Next?

Well, not so fast. You see, the same strategy Intel has incorporated to lock up the PC and server space is being used by Qualcomm to lock up the device space, and it's working. Just as there isn't an Android market so much as it's a Samsung and others market, the chip space for devices is pretty much a Qualcomm et al market.

In smartphones, Samsung holds about half of the Android market, 18 percent of the tablet market and almost all of the Android profits. Strategy Analytics says Samsung has 95% of the Android phone market's operating profit. That's why I call it the Samsung market and not Android market.

Just as Intel locked up all of the key OEM relationships, Qualcomm has a similar position in smartphones and is expanding that into tablets. What little Windows RT effort still coming from Microsoft has been centered around Qualcomm processors.

So what does Qualcomm have going for it that other ARM vendors don't? For starters, it has focused extensively on integration and system-on-a-chip design. Qualcomm has been aggressively trying to integrate the cellular modem, Wi-Fi, bluetooth, GPS, and FM onto a single chip, and it has had this IP for several years.

Intel is only just getting into that space with the acquisitions of Infineon and ST-Ericsson's GPS business. It has some catching up to do.

Intel has spent much of its career on more and faster, while the SoC/embedded market is about more with less. So Intel has had to get power efficiency religion for its Atom chips, which it did. Now it needs to get that same efficiency on its other chips. Its Wi-Fi needs more power efficiency because right now it uses Texas Instrument Wi-Fi for its mobile devices.

Then there's rounding up the OEMs, and boy does Qualcomm have a lock. Just look at the Snapdragon 4 MSM8960 licensee list: It's in Samsung Galaxy S III, Asus Transformer Pad Infinity, BlackBerry Z10, HTC Droid Incredible 4G LTE, HTC One X, Motorola Droid Razr M, Nokia Lumia 820/920 and a whole lot more.

The potential for Intel to separate from the pack comes with the move to 14nm. Once it gets Atom SoCs down to 14nm, that means a whole lot more power efficiency. Qualcomm is fabless and dependent on TSMC for its chips, and TSMC dropped the ball on its move to 28nm last year. So it could come down to Intel once again vanquishes a competitor on its sheer ability to out-engineer and out-manufacture them.

Intel, ARM, Qualcomm, mobile, tablet

© 1994-2013 ITworld.All rights reserved.

Why I'm Staying With Intel And Qualcomm

Disclosure: I am long INTC, QCOM.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Anyone who has been around Wall Street long enough knows very well that investors should be skeptical of analyst recommendations, especially when it comes to technology companies that undergo their own cycles in addition to regular economic cycles. Back in 2000, technology companies like EMC (EMC), Cisco Systems (CSCO), and Sun Microsystems topped the "focus list" of almost every major investment firm on Wall Street. Now, thirteen years later, EMC and Cisco trade at a fraction of their 2000 highs, while Sun Microsystems was acquired by Oracle (ORCL) for a few dollars a share several years ago.

The problem with these kind of recommendations is that they are usually momentum driven, and even if they are right on fundamentals, they come too late -- markets may have already discounted the cause for such recommendations. Evercore's downgrade of Intel, and Citigroup's removal of Qualcomm (QCOM) from the company's focus list are two cases in point. Evercore cited weakening PC sales, while Citigroup cited saturation in the smartphone market. But aren't these trends expected? Haven't the two stocks discounted this expectation?

When it comes to technology leaders, the question for long-term investors isn't how traditional metrics like sales growth and profit margins have been fared in recent quarters, but whether these leaders continue to enjoy sustainable competitive advantage, the subject of the remainder of the article.

Intel

Intel enjoys four advantages:

1. An upgrade cycle. According to the Semiconductor Industry Association, global semiconductor sales

totaled $25.73 billion in December, up 9.7% from April and 2% from the previous month.

2. Barriers to entry. Binding barriers to entry make the industry an oligopoly that allows Intel -- as a larger

player -- to enjoy economies of scale while maintaining pricing power.

3. Successful transition from PCs to mobile devices. This happened with the introduction of new products

like the Atom chip, which powers Windows 8 smartphones.

4. A change in leadership. This is usually followed by new strategic initiatives to improve both the top and

bottom lines of the company.

5. Intel is to benefit from Microsoft's release of Windows 8.

6. Intel is to benefit with the introduction of its Silvermont Atom chips from the smartphone industry.

Analysts expect Intel to earn 39 cents for the last quarter on $12.89 billion revenues.

Qualcomm

In a CNBC interview on November 9th, 2012, Qualcomm's CEO Paul Jacobs pointed to the primary source of

the company's advantage:

"One thing I learned early in my career is that I don't make products for myself. I make them for my customers. We invest heavily in R&D, we get our capabilities ready, and we match the demand when it arises."

Simply put, Qualcomm wins by keeping a close eye on customers and coming up with products to accommodate their needs. That's how the company rides the one emerging trend after another, most notably the smartphone and the tablet industry where Qualcomm has been the main supplier of chips for both Apple (AAPL) and Samsung (SSNLF.PK).

Analysts expect the company to earn $1.03 per share in the last quarter on $6.05 billions of revenues.

What should investors do?

It depends on the investment philosophy of each individual investor. Value investors should stay with Intel. Growth investors are better off with Qualcomm as it offers better growth prospects than Intel.

Intel versus Qualcomm Financial Performance Statistics in 2012

 

Intel

Qualcomm

Dividend

3.70%

2.30%

Operating Margins

25.18

30.78

Qtrly Earnings Growth (yoy):

-25.30%

-16.30%

Qtrly Revenue Growth (yoy):

-2.5%

23.90

Source: Yahoo Finance

1. Size. With $20.46 billion in sales, Qualcomm is less than half of Intel's size. This means that the law of large

numbers works better for Qualcomm, as do the laws of economies. While Qualcomm is at the threshold where returns to scale takes full effect, Intel is approaching the threshold where constant or even decreasing returns to scale begin to kick in.

2. Better company fundamentals.As a pioneer of CDMA technology, Qualcomm enjoys the "first mover"

advantage in wireless communications; and with the recent acquisition of Atheros Communications, Qualcomm strengthened its leadership in the industry.

3. Better industry fundamentals. While Intel remains the leader in the mature PC industry, (though Intel has

made several moves into wireless communications in recent years) Qualcomm maintains leadership in wireless communications - still an emerging industry. Wireless Intelligence estimates that the number of 3G users will reach 2.8 billion by 2014.

4. Riding the industry upgrade cycle. Qualcomm is expected to be the main beneficiary of the wireless

communication upgrade cycle. The GSM Association expects telecom providers to spend $100 billion by 2015 - in High-Speed Packet Access (HSPA), 3G, and 4G.

The Bottom Line: Intel is for value investors while Qualcomm is for growth investors. But growth and value should be part of every portfolio. That's why I own both stocks.

Qualcomm: Understanding The Threats

Disclosure: I am long QCOM, INTC, NVDA, AMD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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As far as semiconductor companies go, Qualcomm (QCOM) is currently on top of the world. However, following a brief stint as the "world's most valuable semiconductor company", shares have actually performed rather poorly year-to-date, offering a negative return of 1.47%. In contrast, Intel (INTC) is up 16.67%, Nvidia (NVDA) up 16.15%, and AMD (AMD) a whopping 70%. While I am bullish on the name, it is important to understand the very real threats that Qualcomm is dealing with now and will have to deal with in the future.

MediaTek, AllWinner, and Other Cheap Asian SoC Vendors

Qualcomm is well known for its high end line of Snapdragon processors and its LTE modems, but did you know that a big driver of volume for Qualcomm has been participation in the Chinese mobile market with its lower- end Snapdragon 200 parts? In this market, it is much more difficult to differentiate from the hordes of other companies doing precisely the same thing. Even Qualcomm doesn't bother to use its own higher end, larger "Krait" processor cores for this market and instead opts to use ARM's (ARMH) off-the-shelf low end Cortex A5 and A7 CPU cores (since it would probably cost more to develop a specialized core for this market than it would to simply use ARM's IP).

(click to enlarge)

it would to simply use ARM's IP). (click to enlarge) The key differentiators in this space

The key differentiators in this space are the following:

Integration - the more functionality that can be integrated on a single chip, the more

Integration - the more functionality that can be integrated on a single chip, the more desirable the product is. Connectivity/cellular integration in particular is key

Cost - while in the high end of the smartphone space, performance matters, in this

Cost - while in the high end of the smartphone space, performance matters, in this ultra-low-cost market, the "best at a low price" is what matters.

Of course, despite the fact that at the low end these chips typically sell for sub $10, there is massive volume in the low end smartphone market, particularly as these devices are simply replacements for feature-phones. While some investors in this space tend to conflate the high-end market with this lower-end market when they

scream "$10 ARM chips", it is important to note the distinction: Qualcomm's Snapdragon 800 chips ain't sellin' for no $10.

Anyway, so the issue that Qualcomm has is that, quite simply, the likes of AllWinner, MediaTek, and Spreadtrum (SPRD) can offer essentially the same product and happily accept lower gross margins. Spreadtrum, for instance, typically sees gross margins of ~38%. In addition, Qualcomm has the additional headwind of trying to fight local, Chinese chip vendors that have established relationships with the local device vendors and wireless carriers. Despite this, Qualcomm has managed to maintain ~33% market segment share in this space.

But the threat on this front is clear as day: there's not a lot of room to differentiate on technology, and margins will continue to come under pressure. The good news is that the secular growth in this space is likely to more than compensate for ASP erosion.

The High End: The Free Ride Is Likely To End

At the high end, Qualcomm lucked out big-time over the last couple of years. The company was the first to offer a multimode LTE modem for phones, and even took it a step further by integrating that modem onto its mainstream applications processors. The nearest competitors - Intel , Nvidia , and Broadcom (BRCM) - won't be shipping solutions that compete with Qualcomm in this space until the end of the year (likely to show up in phones during 1Q 2014). But what happens when these solutions do ship?

Well, here is an interesting snippet from Broadcom's recent presentation at the William Blair Growth Stock conference,

I mean, to give you a sense, how we are understanding is the price points on an LTE chipset, high- end LTE chipset is probably $40, $45 when in fact it probably should be close to $20 or $25, probably $25.

So now you've basically got two major negative forces: the threat of ASP erosion, and the threat of market share loss. This wouldn't be so much of a problem if the market were growing like gang-busters, but the high end market is actually showing signs of exhaustion, as Apple's (AAPL) and Samsung's (SSNLF.PK) recent quarterly reports have indicated. What you have, then, is a flat to slightly up market in which Qualcomm has ~100% market share and is about to come under fire from many strong players.

Samsung Dependence A Double Edged Sword

Right now, Qualcomm actually gets more than 10% of its consolidated revenues from sales to Samsung. On one hand, Samsung's success currently translates into success for Qualcomm, but on the other, if Samsung were to actually develop an apps processor + modem platform that it could use in place of Qualcomm's, then this would represent a pretty dramatic fall-off in chip revenues. The 3G/4G royalties, on the other hand, would still remain.

Qualcomm needs to stay a step ahead of what Samsung's own chip design team can do, otherwise things could get ugly.

Cellular Patent Licensing Still Sweet, But May Suffer From Mix Shift To 4G Only

While Qualcomm's semiconductor business gets a lot of attention, the real money maker is the wireless patent licensing business that it runs. In the most recent quarter, the licensing business (QTL) generated $1.5B of earnings before tax while the modems, apps processors, and everything else generated $1B of earnings before tax. The idea is that for each 3G/4G device sold, Qualcomm gets a percentage of the selling price. This

means that as long as 3G/4G device shipments continue to grow, Qualcomm continue to grow this business. Unfortunately, while Qualcomm now gets paid for both its 3G and 4G/LTE patents in multimode devices, carriers such as Verizon (VZ) have expressed interest in moving to LTE-only devices, which would lower the royalty rate that Qualcomm would receive on these devices.

Why Bother Owning The Stock?

In light of these threats, it may seem that owning the stock wouldn't really be a good idea. In some sense, this is correct: if you're looking for "explosive" growth as we saw when LTE became popular, then I think you will be disappointed. This is a $105B company that already owns the majority of the smartphone apps processor and baseband markets, so there's probably more share price upside in betting on one of the players aiming to gain share in this space (Nvidia, Broadcom, Intel).

However, there's a good dividend growth story going on here and I think that following the recent correction the company may finally start buying back shares instead of simply having a buyback declared. This could help prop up the shares in the near-term, and I think that investors may ease up on their bearishness on the name when the excitement surrounding Qualcomm's tablet penetration (where Qualcomm currently has negligible share) makes up for the gloomy outlook on high end smartphone growth.Also, if it turns out that the aforementioned competitive threats turn out to be more bark than bite, then this could also ease the pressure on the shares.

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

Comments(35)

Do you really think you're smarter than all the engineers and visionaries at Qualcomm? Do you really have inside information on their strategy for high-end and low-end chipsets? How about the costs, performance, margins, etc.? Do you really know the deals they're making in China, India, and other high growth markets?

Do you know the deals they're making with Apple, Samsung, HTC, and hundreds of other wireless phone manufacturers?

The answer is NO. My advice to all you readers, is BUY QUALCOMM rather than listening to rant like this guy.

7 Jul, 02:46 PM

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bgessner,

One need not know all of the detailed inner workings of Qualcomm to understand the competitive landscape. Qualcomm can't make the flat-lining high end smartphone market grow and they can only get so much revenue from lower end phones.

Your argument is 100% faith-based with no foundation in reality. Will Qualcomm be in the next wireless opportunity before everyone else and make a lot of revenue in the process? Yes, but that is literally years away. In the meantime, they are going to be exposed to margin erosion from the competition catching up as the wireless infrastructure prevents Qualcomm from moving on to the next big thing.

7 Jul, 03:36 PM

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bgessner - Please read Ashraf's Disclosure (He is Long $QCOM).

Disclosure: I am long QCOM, INTC, NVDA, AMD. (More

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No one is forced to read any of the SA articles & therefore no one is forced to waste their energy by making un-deserving comments.

7 Jul, 06:21 PM

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8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

@Ashraf Eassa - good article. There are threats to Qualcomm and opportunities. In my view, buying back stock is a fool's game in a capital intensive business. It differentiates shareholders - those who sell and those who stay - rather than dividends that treat all equally. It props up earnings per share in a company where growth is slowing masking poor operating performance. The only case for buybacks is really when the company is trading well below fair value, not the case with Qualcomm. Management should invest to meet Intel and the lower priced threats and continue to innovate,and, as earnings grow, increase dividends.

The next few years will be interesting as Intel flexes its muscle in the space. Qualcomm can meet Intel on an equal footing if it spends its money advancing and innovating. If it becomes a balance sheet play with major stock buybacks, I will be a short.

7 Jul, 03:19 PM

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Actually the stock is trading below its' intrinsic value currently. As such buying back stock makes a lot of sense.

8 Jul, 07:03 AM

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Good write up pointing to the competitive market in which QCOM operates in. The fact is that the smartphone market has reached a saturation level where every consumer is looking for the next generation of "smart " devices be it phones,tablets,laptops or TVs To this point,I don't believe the QCOM engineers have been seating on their hands.

7 Jul, 04:28 PM

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I've actually never been forced to read an SA article. I do however read most of Ashraf's articles simply because he is much more knowledgeable in the Tech sector than I am

7 Jul, 05:05 PM

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Tim McAleenan Jr. C o m m e n t s ( 1 8 6
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Tim McAleenan Jr. C o m m e n t s ( 1 8 6 0

Most articles on Seeking Alpha are easy to filter out because the author's name is labeled next to the piece in most cases.

And even if I click on something I do not want to read, I have learned this--in under two, count 'em two!--seconds I can get away from an article and find something else I'd enjoy.

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

Surprisingly, surfing the web is no great hardship, and something that can be done with remarkable ease--all you have to do is click!

Ashraf, FDR once said something to the effect, "If I'm not pissing anyone off, I'm not doing anything worthwhile." You see plenty of writers on SA who receive no comments at all, because their ideas are not strong enough to be worth it. You make compelling arguments, and you have a reader base that reflects that.

Some commenters post 10-20 negative things for every neutral/positive comment they have to say. With a ratio like that, who do you think is the problem: The author or the commenter?

Keep it up, Ashraf. You're a tribute to this site, and Seeking Alpha is lucky to have you, my friend.

7 Jul, 05:22 PM

 

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Ashraf Eassa Comments (6297)
   
 
Tim,

Tim,

Thank you, sir. You know I feel equally positively about your work.

 

7

Jul, 06:09 PM

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Really! You want to write articles for people to read, and then worry about negative comments?

I have stopped clicking on your (Tim's) articles because they are oh so inspiring and therefore uninformative and boring (repetition of the same Mantra, start young, buy good dividend growth stocks, here is Munger saying something, here is Buffet saying something , start young, buy good dividend growths stocks, looped over and over ad nauseum) and the comment threads are all bordering on extreme flattery.

If that is what you want, good luck to you.

I hope that Mr. Issa, given the actual information that he so painstakingly assembles and presents, does not seek flattery from his readers.

8 Jul, 12:46 AM

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@Tim

It's kind of ironic that you think that if a few of your commentators are teed off that is sign of saying something right, but if your commentators feel the same

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

way the other way round, you get all bothered and flustered. Self Awareness is something that you perhaps need to have more of.

8 Jul, 01:39 PM

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"you get all bothered and flustered."

Varan, I have no problem with people who disagree with my ideas. The only time I have a problem is when people say things about me personally rather than the ideas I present because that doesn't seem right.

I wish everyone, including you, the best with their investing and hope they reach their goals. It does not bother me whether you get there with dividend stocks, Berkshire, index funds, or whatever strategy you employ. Lots of ways to get rich in a $13 trillion economy!

When I write an article, it's because I'm trying to use common stocks to put together a nice life for myself and use them to meet my goals. I've been lucky that some readers appreciate what I have to say. Personally, I don't understand why someone would heckle others as they try to make their dreams come true. Perhaps, on some level, you know that some of your comments aren't exactly aiding and encouraging folks on the path to making their lives better, and that could partially explain why you choose to use a pseudonym instead of your real name.

8 Jul, 02:03 PM

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@Tim Wow! You were doing good till the the last two sentences. I hope that when you write your articles you do not make the same types of leaps of logic that are wholly unjustified by the available data, although the ones that I have read suggest that such may indeed be the case.

8 Jul, 02:29 PM

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Okay, I could be wrong. In my experience with your comments on my articles, it just seems that people have been getting along fine, doing their thing, and then you've interjected with some kind of negativity. At least, I think you've done that to me five or six times. But if you don't think you instigate stuff with the deliberate intention of getting under people's skin instead of helping them reach their goals, that's fine. I see it differently I guess.

It just seems to me that, in some of your comments, you're trying to get a rise out of people instead of help them out.

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

8 Jul, 03:04 PM

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<<I hope that Mr. Issa, given the actual information that he so painstakingly

assembles and presents

>>

It's 'Eassa'-not Issa. Please pay attention if you're going to complain. Sheesh.

There is an Issa in the state gov't of CA and if you'd like to complain about him, this is not the place for it.

8 Jul, 10:59 PM

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LarryMelman - Please read my words.

No one is forced to read any of the SA articles. Therefore no one is forced to waste their energy by making un-deserving (BAD) comments. Please save your energy for yourself (for your bad moments) & your loved ones.

7 Jul, 06:26 PM

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I'm free to comment however I choose, as long as the attacks are not personal. As is anyone. You're right, I choose not to read his articles. But when they keep showing up attached to the tickers in my portfolio here, what should I do?

7 Jul, 07:38 PM

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L i k e 0 R e p l y Ashraf Eassa Comments (6297) "You're right,

"You're right, I choose not to read his articles. But when they keep showing up attached to the tickers in my portfolio here, what should I do?"

If you can see the author beforehand, don't click it. If you click it and you see my handsome face, close your browser immediately.

It's that simple. I'm surprised that despite your apparently keen wit that you could not figure out this simple algorithm. I don't think you are incapable of figuring this out, so that leads me to believe that you are simply attempting to troll my article.

7 Jul, 07:45 PM

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8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

I know little about the tech sector but what I know is the Mr. Eassa doesn't seem to be pumping stocks. He offers his analysis and puts it out there. It's up to you to do the rest. I for one enjoy the articles and am pleased to add to your coffers. Keep up the good work.

7

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Thank you, sir. Glad you enjoy my work! :)

Thank you, sir. Glad you enjoy my work! :)

7

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Ashraf, I am following you for some time and most of your articles are against Qualcomm or ARM. you hardly said good things about Qualcomm. In my opinion your articles are emotional, rather than reality

7 Jul, 08:08 PM

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Mobile,L i k e 0 R e p l y Ashraf Eassa Comments (6451) Then you're

Then you're not actually reading the articles, then

Maybe your responses are emotional, rather than based in reality. Or maybe you simply do not follow my articles as you claim you do.

7 Jul, 08:14 PM

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>I am following you for some time and most of your articles are against Qualcomm or ARM

He's long both

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

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Ashraf Eassa Comments (6451)
   
 
dnorm1234,

dnorm1234,

Funny how that works, eh? :)

 

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Samsung Dependence A Double Edged Sword 10% revenues from single client is a not a dependence at all.

I agree that the competition is intense (especially at the low end segment). I dont believe that QCOM is standing still waiting for the competition to catch up.

7 Jul, 08:19 PM

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Wireless Knoledge C o m m e n t s ( 7 )
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Ok let me understand, your point of view. From 10000 ft, everything has to go against qualcomm . I agree market would be tough, but there are few things qualcomm is doing which is in public space

But first your point that QCOM doesn't integrate ARM processor core in low end chips being sold in china. It is clear qualcomm is dooing product differentiation. When consumer think of Krait core they want them to think of "High End" Core. and than at low end what you do where people just care about "number of core" and price, just pick up off the shelf component and feed it. Spend low end energy on integration and price point rather than eroding your brand. If you remember, your dear intel created "Pentium" and "Celeron" where celeron was low end brand of intel compare to pentium. If i understand correct, QCOM believes more in integrating with ARM core rather than coming up with new core. Though they may come up with Low end Chipset Architecture (Remember i am talking about SOC architecture rather than CPU cores).

About your other points about competition, i want to make few points.

1. Samsung semiconductor always had modem and they tried to use ARM CPU to compete with qualcomm and earn Samsung Phone business from QCOM. But they struggle coming up with "Universal Solution". Broadcom LTE solution is 3 generation behind when it would see "Day of Light" ( BRCM said it would go commerical next year in 2014) by the time QCOM 3rd Generation LTE with carrier aggregration and 40+ LTE band support would be in.

Also, From all public information, seems like qualcomm is planning MASS LTE chipset, which would penetrate LTE in mass smartphone ( may be $250 Pricepoint), so eventhough they may not have 100% market share in next 2 years, because LTE integrated market would grow and they would have still majority share ( above 60%)

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

.

One more point, by the time competition comes up with some comeptitive LTE integrated solution, qcom would start pitching "LTE-advanced" and competition would be playing catch up.

you mentioned all big names you can think of i.e samsung/BRCM /Intel in baseband market. I think real threat qualcomm would be worried would be HiSense ( Huawei)

which has very efficient LTE design in market compare to any other competitor you

mentioned.

2. By early next year, QCOM RF 360 solution would be in fully available, that means

so much fragmented RF bands in 3G/4G worldwide, anyone willing to launch world phone, would be looking at QCOM for solution. So it plays in QCOM's hand. I haven't heard any of your above mention company coming up with something similar. "Advantage " QCOM.

3. You claim QCOM is overdependent on Samsung ,and if i assume that's truth,

let's for a minute assume samsung /apple looses market share , who gains.

LG -- Major customer of QCOM and feeding on QCOM product line, They revived themselves based on QCOM solutions.

HTC - again Major customer and feeds on QCOM solutions.

RIM -- Exclusive BB10 supplier of chipset is QCOM.

Windows phone OEMs -- QCOM is exclusive chipset supplier.

So, i think QCOM would be more than ok for some reason Apple/Samsung looses grip on their market share. QCOM would turn out to be fine and may be "happy" too!!!

4. LTE single mode.

---Really??? Flag barrier for Single Mode LTE devices with VOLTE is Verizon . They want to deploy it fast. But if my information is correct, internally Verizon don't forsee major LTE only devices till 2017 or later. Till the time, they expect flagship devices to carry both 3G/4G.

So, all in all, it is competitive market, but in my eyes, QCOM is playing on its

strength and they are not sitting idle. They are making it difficult and difficult for

competition.

7 Jul, 10:27 PM

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Investing in technology is tough. How long do qualcomm's patents last? What I do know is that smartphones will become like the air we breath. I watch mothers entertain their 3 year old kids with these devices. All commerce will eventually migrate to wireless payments along with augmented reality. I am holding this stock and am betting that every share bought today will be worth $500 in ten years and I think that is being conservative. Wish I could see into the future. Qualcomm is entrenched in the wireless world.

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

7 Jul, 10:34 PM

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I am not promoting this website but if you want to follow what the pros are buying goto dataromacom. Aig,nov,dtv,dva are some value plays.

7 Jul, 10:37 PM

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AMD long

and

its becoming long as we all can see

but

wait for the earnings

soon.

8 Jul, 01:33 PM

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Ashraf,

Qualcomm has many more products and market you might want to add in your analysis.

Here is nice place in their website where you can learn more about them.

Now lets stick to Semiconductors and Internet of Everything. Cisco Predicts that the Internet of Everything market of the size of 14.4 Trillion dollars. In powering the internet of everything, data connectivity will be a big problem and hence there will be big need for small cells once the teleco's start moving to LTE Advanced or the real 4g as opposed to current 3.9g we have in US. I believe small cells will be a big market for Qualcomm who make processors for the same.

Now lets get back to royalties.

Lets take developing market for this example. The 3g penetration in India is at mere 7% which mean about 1.2 billion potential customers for 3g.

Now lets assume a very modest ASP of $200 on average. Note that India still have a lot of rich people and they do end up getting pretty darn expensive phones. Assume roughly (as rumored) 5% royalty for 3g phones. That equates to $10 per device or a total market of 12 billion dollars. Even if the 3g penetration manages to be at mere 50% in next couple of year that still equates to potential $6 billion in revenue from 3g

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

phones only. But I believe the penetration will be at a higher number and a faster rate.

A similar argument can be put forth for China and other developing counties in South

America.

Now the real growth story is all about developing countries. Even if Qcom manages

to keep hold of 33% market share it has in China, that still equates a very good

overall growth. But china is moving fast to 4g and that is where Qcom strengths will start showing up.

All in all if your dream of Intel eating up Qcom's smartphone lunch comes true than also I see Qcom posting double digit growth for next couple of years just because of the sheer size of the market.

And at the same time I find it funny the conversation about smartphone market saturation from Citi bank.

8 Jul, 07:55 PM

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Hi Ashraf,

Nice Article!!!

What is your opinion for intel and AMD joining Tablets market with X86 processor ? What do expect for these new joinees in Market.

9 Jul, 03:51 AM

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In the PC market, Intel has always been top dog. Intel and its loyal investors must

know, then, that it's difficult for smaller players to compete with the established big

boys. Witness AMD, barely surviving against Intel, again for PCs.

Now the tables are turned for wireless devices. Qualcomm is the obvious leader, and Intel is experiencing similar problems to those that plagued AMD in the PC market. It's all well and good to rave about Intel's process technology, its 14 nm chips, its high speed processors, and low power consumption. But the fact is that:

1. So far, even the latest Haswell chips, combined with radio and related chips for

smartphones/tablets, consume more power than chips based on ARM designs,

whether made for Apple, Qualcomm, Samsung, or other major producers.

2. Intel, in order to establish a foothold in the smartphone/tablet market, will have to

price its chips competitively, which will, without a doubt, result in much lower gross margins than Intel is accustomed to report. When coupled with the flat or declining demand for PC chips, Intel's future earnings growth (as opposed to growth in unit sales) is clouded indeed.

A growing number of investment firms now realize that Intel may not be as good a

growth prospect as they had believed earlier in the year. Despite an attractive

8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

dividend, the shares will probably remain depressed until investors see better profit margins, and these may not occur for another year.

Meanwhile, many other investment firms have downgraded Qualcomm on the premise that sales growth for smartphones and tablets is waning. I'd like to see the data to back up those views. What is known, however, is that, especially in developing nations, wireless phone users are switching from old second generation phones to third or fourth generation smartphones, making the growth in demand for the types of equipment that generate royalties for Qualcomm healthy indeed.

There is simply no basis to claim or infer that Intel is about to eat Qualcomm's lunch. Maybe the reverse is closer to reality.

9 Jul, 06:02 PM

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Wireless life as a journalist wannabe is hard! It's harder when your stupid!

10 Jul, 07:51 PM

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There are LTE chips and there are LTE chips. Qcom is on its third generation. Using technology developed by Qcom the chip is world mode, transfers data at twice the conventional LTE data rates, drastically shrinks the amount of area in a handset now dedicated to addressing the multiple RF frequencies, and it is part of the Snapdragon 800 processor chip, a true SOC. It does much more with technology, making it attractive to carriers and handset makers worldwide. So when you say a company is going to pose a threat to Qcom in LTE as soon as they can get their first chip working in six months, it can be a little frustrating to some Qcomers as evidenced above. This chip can do much more than there is room here. If interested view the following presentation on Snapdrason 800 that includes a section on the LTE third generation.

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Sam Liu Comments (3550)
   
 

What's up Ashraf?

QCOM is launching.

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8/16/13

QUALCOMM, Inc. (QCOM): Qualcomm: Understanding The Threats [Apple Inc., Intel Corporation] - Seeking Alpha

Intel Or Qualcomm?

Disclosure: I am long QCOM, MSFT.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

(More

)

High-tech leaders Intel (INTC) and Qualcomm (QCOM) are about to report Q1 earnings-Intel is reporting on April 16, while Qualcomm is reporting on April 24.

Earnings Estimates for Intel and Qualcomm

Company

High

Mean

Low