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. QUALCOMM also licenses technology rights from its large intellectual property portfolio. QUALCOMM offered some $47 billion to buy NXP Semiconductors in 2016.
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.
The CDMA business is QUALCOMM's biggest, generating 69% of revenue. Its technology licensing unit brings in the rest.
The Asia/Pacific area is the company's largest regional market with more than 80% of revenue. China, South Korea, and Taiwan represented about 53%, 16%, and 13% of sales, respectively.
Sales and Marketing
Combined, Samsung, Hon Hai Precision Industry Co., and other suppliers to mobile phone makers, account for 45% of QUALCOMM's sales.
Revenue, profit, and cash flow fell in 2015 from 2014 at QUALCOMM, interrupting several years of steady growth.
In 2015 revenue slipped 5% to $25 billion from 2014, mainly due to an 8% drop in sales of its QCT technologies segment. A shift in share among its customers within the premium tier hit sales of the Snapdragon processors and skewed the product mix toward lower-margin modem chipsets. Also, a large customer bought less in 2015 and the competitive environment in China contributed to the revenue drop.
QUALCOMM's net income dropped 34% to $5.23 billion in 2015 from 2014, trimmed by lower revenue and higher expenses, which included charges related to its Strategic Realignment Plan.
Cash flow from operations was $5.5 billion in 2015, compared to $8.9 billion in 2014.
China has become an important market for QUALCOMM and the company cleared the way for continued growth in the country by resolving an anti-monopoly case against it.
In early 2015, QUALCOMM agreed to pay almost $1 billion for violating China's antimonopoly law as charged by China's National Development and Reform Commission. As part of the resolution QUALCOMM will offer licenses to its current 3G and 4G essential Chinese patents separately from licenses to its other patents and it will provide patent lists during the negotiation process.
Concluding the case should allow QUALCOMM work with Chinese companies as they expand in China and sell their products around the world. However, competitive pressures held the company's 2015 growth in China to just 1% in 2015. But in 2016 QUALCOMM granted Chinese manufacturer Hisense a royalty-bearing patent license to develop, manufacture, technologies for use in China.
In late 2015 QUALCOMM implemented a Strategic Realignment Plan designed to reduce annual costs by $1.1 billion through a series of targeted reductions across the company’s businesses, but focused on the QCT segment. The company expect the plan to cost $350 million-$450 million, of which $190 million were incurred in the 2015 fourth quarter.
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.