Qualcomm is more of a royalty play than anything else. In fact majority of it's revenues and tied to patents on it's IP. This forms it's investment thesis and propel the company from the 80s. Understanding patents and IP rules/laws is the key to understanding Qualcomm it's business model & investment case.
The story for me is that Qualcomm has an enduring engineering quality advantage. Many customers hope to cut them out, but then discover that the Qualcomm engineers understand stuff that they can't match - or has already figured out, and patented, a bottleneck their internal engineers belatedly figure out for themselves.
Qualcomm's basic model for more than thirty years is to always be losing the low end of the market while their engineers successfully advance the frontier into a new high end.
16.7% of Qualcomm revenue in their recent 4Q was from licenses, which is the largest share over the previous four quarters. I suspect this is just them enabling their competitors at the low end, a market they are continually abandoning as they advance the frontier and thus has low end chasing along behind them, paying Qualcomm for the privilege.
I fully agree, Duane! This is a very accurate description of the situation. I will try to spend some more time on these license revenues in my next post on Qualcomm!
Great article, but It was a quick no from me when I saw that 62% of revenue comes from China! China is cutting out Western producers left and right, + the geopolitical risk is too high.
China concentration is a risk, but it's much less of a risk than implied in that comment.
Qualcomm has been doing well in China for more than thirty years. The Chinese need them. Plus, most of that China revenue is for production that ends up being exported everywhere. The Chinese are the ones making most of the world's Android phones that are then exported everywhere. The Chinese don't mind messing up their domestic consumers to help their industrial base or meet strategic goals. However, they try to avoid messing up export customers to do the same. Qualcomm is a key part of what makes the export product viable.
Fully understand. This is also one of the bigger reasons I am not growing the position to above 2% of my portfolio right now. Indeed, it is a higher-risk investment.
Great article. Great analysis. Keep killing it bud 💪
Qualcomm is more of a royalty play than anything else. In fact majority of it's revenues and tied to patents on it's IP. This forms it's investment thesis and propel the company from the 80s. Understanding patents and IP rules/laws is the key to understanding Qualcomm it's business model & investment case.
The story for me is that Qualcomm has an enduring engineering quality advantage. Many customers hope to cut them out, but then discover that the Qualcomm engineers understand stuff that they can't match - or has already figured out, and patented, a bottleneck their internal engineers belatedly figure out for themselves.
Qualcomm's basic model for more than thirty years is to always be losing the low end of the market while their engineers successfully advance the frontier into a new high end.
16.7% of Qualcomm revenue in their recent 4Q was from licenses, which is the largest share over the previous four quarters. I suspect this is just them enabling their competitors at the low end, a market they are continually abandoning as they advance the frontier and thus has low end chasing along behind them, paying Qualcomm for the privilege.
I fully agree, Duane! This is a very accurate description of the situation. I will try to spend some more time on these license revenues in my next post on Qualcomm!
Great article, but It was a quick no from me when I saw that 62% of revenue comes from China! China is cutting out Western producers left and right, + the geopolitical risk is too high.
China concentration is a risk, but it's much less of a risk than implied in that comment.
Qualcomm has been doing well in China for more than thirty years. The Chinese need them. Plus, most of that China revenue is for production that ends up being exported everywhere. The Chinese are the ones making most of the world's Android phones that are then exported everywhere. The Chinese don't mind messing up their domestic consumers to help their industrial base or meet strategic goals. However, they try to avoid messing up export customers to do the same. Qualcomm is a key part of what makes the export product viable.
That might be true, I don't know enough about the industry to judge. For my risk tolerance, 62% China exposure is too high.
That is very true, Duane. Thanks for the insight!
Fully understand. This is also one of the bigger reasons I am not growing the position to above 2% of my portfolio right now. Indeed, it is a higher-risk investment.
Good read. Thank you.
Thank you, Jose. Appteciate it!