Cell phone makers, wireless carriers, and governments worldwide call on QUALCOMM to engineer a quality conversation. The company pioneered the commercialization of the code-division multiple access (CDMA) technology used in digital wireless communications equipment and satellite ground stations mainly in North America. It generates most of its sales through the development and marketing of semiconductor chips such as its Snapdragon line and system software based on CDMA and other technologies. Its biggest customers are suppliers to mobile phone makers Samsung and Apple. The company also licenses technology rights from its large intellectual property portfolio. QUALCOMM has offered $47 billion to buy NXP Semiconductors.
In addition to CDMA technology, the company's other technologies include Orthogonal Frequency Division Multiple Access (OFDMA), which allows multiple access on the same channel, and next-generation Wideband Code Division Multiple Access (WCDMA), designed to ease the transmission of multimedia content.
QUALCOMM CDMA Technologies (QCT) is the company's biggest business, generating 65% of revenue. Its QUALCOMM Technology Licensing (QTL) unit unit brings in the rest.
The Asia/Pacific area is the company's largest regional market with more than 85% of revenue. As for single markets within the region, China dominates with customers there accounting for nearly 60% of QUALCOMM's sales; customers in South Korea and Taiwan each represent less than 20% of the company's sales.
Sales and Marketing
Combined, Samsung and mobile-phone maker suppliers to Apple such as Hon Hai Precision Industry Co. account for 45% of QUALCOMM's sales.
In 2016 (ended September) QUALCOMM's revenue slipped 7% to $24 billion from 2015. Revenue from the CMDA technologies segment fell 10%. The drop resulted from a shift by customers away from its premium circuits, which tilted the company's product mix to lower-margin products. Qualcomm also had a smaller share of large customers' business and competition in China put pressure on prices. In licensing, revenue dropped 4% due to lower per-unit revenue as well as recognition of unearned license fees. The company said licensing revenue was hurt by the practice of some licensees not reporting sales of licensed products.
QUALCOMM's net income rose 8% to about $6 billion in 2016 as it recorded lower costs compared to 2015. The company implemented a cost-cutting plan in 2015. It reported $202 million in restructuring costs in 2016.
Cash from operating activities increased to $7 billion in 2016 from about $6 billion in 2015. The 2016 figure rose on changes in working capital, which was boosted by a $950 million in fiscal 2015 to secure long-term capacity commitments at a supplier, and the increase in net income.
After settling an anti-monopoly case in China, QUALCOMM has aggressively pursued growth in the country, particularly with its licensing business. The company has signed license agreements with nine of the top 10 largest Chinese OEMs and it expects more agreements to come. The company also anticipates a higher level of compliance with agreements in 2017.
Although QUALCOMM lost a bit of business when Apple sent some of the chip business for the iPhone 7 to Intel, the company has posted stronger-than-expected revenue since then. The company sees growth in expanding use of 3G and 4G wireless networks throughout the world. It also is investing and testing technologies for 5G networks, which are expected to carry much more traffic at higher speeds than current networks.
The acquisition of NXP should expand QUALCOMM's automotive chips business beyond communications into chips that control vehicle functions such as braking and fuel mix as well as safety features.
Mergers and Acquisitions
QUALCOMM moved to buy NXP Semiconductors with a $47 billion offer in October 2016. NXP accepted the offer, but the deal was expected to raise concerns among regulators. QUALCOMM was interested in NXP's line of chips for automotive, internet of things, and networking and security. The deal, the biggest in the chip industry, continued a wave of consolidation that's intended, overall, to create what companies hope are bulwarks against increasing competition and decreasing price points.
In August 2015, QUALCOMM completed the acquisition of CSR, a UK-based maker of multifunction computer chips, for about $2.5 billion. CSR makes semiconductors for the auto, consumer and voice and music market segments. The acquisition provides QUALCOMM with CSR's products, channels, and customers in burgeoning markets of the Internet of Things (the idea that billions of devices can be connected to the Internet) and automotive infotainment.
In early 2014 QUALCOMM acquired a mobile patent portfolio from Hewlett-Packard that includes some 2,400 granted and pending patents covering the US and other countries. To meet demand for mobile data speeds, it bought Israeli company Wilocity, which is developing chips for 60 GHz next-generation Wi-Fi, also known as WiGig technology. Later that year it bought EmpoweredU, a small California company that makes a cloud-based mobile platform for the higher education market.