To The Moon

My favourite semiconductor company is not a real semiconductor manufacturer, since it operates on a fabless basis. I was introduced to Qualcomm about 8-9 years ago from a book I was reading, "The invisible edge", by Mark Blaxill, et al.

Qualcomm was founded only in the 80s in San Diego California. It was initially operating at a loss in the 90s till it gave up its manufacturing business. Believe it or not, that was the best piece of business decision for the company at that time. The following year, its business took off! The decision to give up manufacturing means removing the weakest links in its business. 

To understand this, we need to revisit the history of Qualcomm. Qualcomm was founded by a group of engineers led by Irwin Jacobs. Their first success was actually a patent for CDMA invention. They then setup a manufacturing plant to make handphones (2G as we know it) in the 90s. While making handphones ensure that the technology is being used, due to their lack of manufacturing experience and expertise, the company was slowly bleeding to death. Qualcomm decided to engage outside help by forming joint partnership in manufacturing, but this has not stopped the bleeding. Meanwhile, it is facing separate lawsuits from Ericsson and Motorola. In 1999, Qualcomm decided that enough is enough. Qualcomm makes the decision to divest its wireless infrastructure division to its rival, Ericsson, as part of out of court settlement. While Ericsson gained Qualcomm technology, Qualcomm received licencing fees from both Ericsson and Motorola (in a separate deal). Qualcomm followed this up by selling its personal electronic manufacturing interest to a Japanese chip manufacturer, Kyocera.

I quote Jacobs who said at that time, "We'll do the innovative part and let others do the manufacturing." And the rest, as the saying goes, is history.

After getting rid of what had tied it down, Qualcomm becomes a lot more lean and fit. Qualcomm can now focus on its strength, which is the patents. Subsequently, Qualcomm becomes more focused on using its intellectual property. It begins to strike more licensing deals for its patent portfolio. 

With free-up time and energy, the management also put more efforts into R&D to generate more patents. Its profits start climbing, so is its stock price. Qualcomm becomes stronger and started on acquisition paths to expand its reach. Started humbly armed with a CDMA patent, it moves into other technology space, like healthcare, cell towers, self-driving cars, just to name a few.

Nowadays, when you mentioned IoT, driverless vehicle, 5G and beyond, all things involving wireless communications, Qualcomm is in your face, literally, be it directly by using its chips or indirectly through licensing agreement.

I am a long term holder of Qualcomm. I have bought some shares about 7-8 years ago and it has rewarded me with both dividends and appreciation. Even if the market is to collapse tomorrow, I will only add to my holding than selling them. Why? I note that unless we humans can one day do away with the comfort of wireless communications, Qualcomm is here to stay, AI or otherwise. 

Just a small after note, yes, Qualcomm is also into AI focus products, such as the Snapdragon neural processing engine.

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