To The Moon

There is a saying “Life always offers you a second chance, it’s called tomorrow”.

Will there be a “tomorrow” for $Qualcomm(QCOM)$, the American MNC that designs semiconductors, software and services synonymous with wireless technology?

• Qualcomm is a leading wireless technology company that develops and licenses products and services based on the Code Division Multiple Access (CDMA) technology.

• It was founded in 1985 by a group of former MIT and UC San Diego researchers.

• It went public on 20 Dec 1991 at $16 per share.

• 8 years later in 1999, Qualcomm became the top-performing stock in the S&P 500 index, with a staggering return of +2619.14% for the calendar year (see below).

• Qualcomm was at the right place, at the right time, with the right product.

• It benefitted from the rapid growth of the wireless industry, especially in emerging markets like China and India, where CDMA was widely adopted as the standard for mobile communications.

• Qualcomm also enjoyed strong demand for its chips and software from handset makers such as (a) Samsung, (b) Motorola, and (c) Nokia.

• Unfortunately, Qualcomm's 1999 stellar performance was not repeated in the following years.

The company faced several challenges that eroded (a) its competitive advantage and (b) profitability.

The challenges:

• Emergence of new wireless technologies, such as GSM, WCDMA, and LTE, that competed with CDMA and reduced Qualcomm's market share and royalty revenues.

• Increasing competition from other chipmakers, such as Intel, Broadcom, MediaTek, and Huawei, that offered cheaper and more integrated solutions for wireless devices.

• Legal disputes with various regulators, customers, and competitors over Qualcomm's patent portfolio and licensing practices, which resulted in fines, injunctions, and settlements.

• Last but not least, cyclical nature of the wireless industry, exposed Qualcomm to fluctuations in demand and pricing for its products and services.

• The 4 main root causes (see above) have impacted Qualcomm's stock price.

• On 25 May 2023, Qualcomm’s stock price bottomed at $104.02 per share.

• On 14 Jan 2022, its stock price peaked at US$188.69.

• In a short span of 8 months, Qualcomm stock price have fallen by -55.13%.

• Needless to say, its market capitalization was impacted too.

Qualcomm's Future:

• Depend very much on its ability to (I) innovate and (ii) adapt to the changing wireless landscape.

• It is clearly vested in R&D to create new products and technologies that can enable the next generation of wireless applications, such as (a) 5G, (b) Internet of Things (IoT), (c) artificial intelligence (AI), and (d) autonomous vehicles.

• The company also pursue (1) strategic partnerships and (2) acquisitions to expand its customer base and (3) diversify its revenue streams.

• On Tue, 05 Sep 2023 Qualcomm CEO, Cristiano Amon thinks artificial intelligence (AI) could give the smartphone market a fresh lease on life.

• He sees significant opportunity in AI ahead.

• For Qualcomm’s upcoming October 2023, Snapdragon Summit could lead to major developments in mobile technology.

• Based on inferences, the CEO drew parallelism on (1) what Microsoft’s doing for PCs and (2) the ability to run ChatGPT and other models locally.

• Mr Amon said. “So, as those things get to the hands of consumers, I think it’s going to be material ...”.

• A day later, on Thu, 07 Sep 2023 the news that China has banned officials from using iPhone sent $Apple(AAPL)$ stock price tumbling.

• In a spate of 2 days, Apple has lost over $200 Billion in market value on reports of the Chinese ban being expanded.

• The new’s has a ripple effect on Qualcomm as Apple Inc is one of its major customers.

• Not forgetting that China, including Hong Kong, accounts for roughly two-thirds (66%) of Qualcomm's revenue.

• The latest move by China’s central party seems to be a reactive-stance towards US governors “short sighted” move to appeal to US government to further tighten restrictions on Huawei in light of their latest mobile phone released with 5G capabilities.

• Will a tit-for-tat escalate into a full-scale battle between the 2 Titans with an outright ban of Apple access to the Chinese market?

• If it comes to that, we would be looking at US tech market Nasdaq crashing.

• Qualcomm’s upcoming Snapdragon summit on the island Maui, Hawaii from Oct 24-26 will see the unveiling of its much-awaited Qualcomm Snapdragon 8 Gen 3 processor chipset.

• The Gen 3 processor is expected to power the best of breed Android phones and the chipset’s cores should be based on the newly announced ARM’s Total Compute Solutions 2023 cluster.

• With UK chip designer ARM in the limelight (ahead of its Oct IPO), these might just be the alibi US market needs to drive the stock price higher.

• Do you think Qualcomm will be able to pull off the Gen 3 processor chipset?

• Do you think US market analysts will make a beeline for the stock on the run up to the Snapdragon Summit?

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