Longtime processor suppliers Intel Corp and Advanced Micro
Devices have no chips as energy efficient as Apple's. Qualcomm Chief Executive
Cristiano Amon told Reuters on Thursday he believes his company can have the
best chip on the market, with help from a team of chip architects who formerly
worked on the Apple chip but now work at Qualcomm.
In his first interview since taking the top job at San
Diego, California-based Qualcomm, Amon also said the company is also counting
on revenue growth from China to power its core smartphone chip business despite
political tensions.
"We will go big in China," he said, noting that
U.S. sanctions on Huawei Technologies Co Ltd give Qualcomm an opportunity to
generate a lot more revenue.
Amon said a cornerstone of his strategy comes from a lesson
learned in the smartphone chip market: It was not enough just to provide modem
chips for phones' wireless data connectivity. Qualcomm also needed to provide
the brains to turn the phone into a computer, which it now does for most
premium Android devices.
Now, as Qualcomm looks to push 5G connectivity into laptops,
it is pairing modems with a powerful central processor unit, or CPU, Amon said.
Instead of using computing core blueprints from longtime partner Arm Ltd, as it
now does for smartphones, Qualcomm concluded it needed custom-designed chips if
its customers were to rival new laptops from Apple.
As head of Qualcomm's chip division, Amon this year led the
$1.4 billion acquisition of startup Nuvia, whose ex-Apple founders help design
some those Apple laptop chips before leaving to form the startup. Qualcom will
start selling Nuvia-based laptop chips next year.
"We needed to have the leading performance for a
battery-powered device," Amon said. "If Arm, which we've had a relationship
with for years, eventually develops a CPU that's better than what we can build
ourselves, then we always have the option to license from Arm."
Arm is in the midst of being purchased by Nvidia Corp for
$40 billion, a merger that Qualcomm has objected to with regulators.
Amon said Qualcomm has no plans to build its own products to
enter the other big market for CPUs - data centers for cloud computing
companies. But it will license Nuvia's designs to cloud computing companies
that want to build their own chips, which could put it in competition with
parts of Arm.
"We are more than willing to leverage the Nuvia CPU assets to partner with companies that are interested as they build their data center solutions," Amon said
Branding Challenge
Phone chips accounted for $12.8 billion of its $16.5 billion
in chip revenue in its most recent fiscal year. Some of Qualcomm's best
customers, such as phone maker Xiaomi Corp , are in China.
Qualcomm is counting on revenue growth as its Android
handset customers swoop in on former users of phones from Huawei, which was
forced out of the handset market by Washington's sanctions.
Kevin Krewell, principal analyst at TIRIAS Research, called
it a "political minefield" due to rising U.S.-China tensions. But
Amon said the company could do business as usual there.
"We license our technology - we don't have to do forced
joint ventures with technology transfers. Our customers in China are current
with their agreements, so you see respect for American intellectual
property," he said.
Another major challenge for Amon will be hanging on to Apple
as a customer. Qualcomm's modem chips are now in all Apple iPhone 12 models
after a bruising legal battle. Apple sued Qualcomm in 2017 but eventually
dropped its claims and signed chip supply and patent license agreements with
Qualcomm in 2019.
Apple is now designing chips to displace Qualcomm's
communications chips in iPhones.
"The biggest overhang for Qualcomm's long-term stock
multiple is the worry that right now, it's as good as it gets, because they're
shipping into all the iPhones, but someday, Apple will do those chips
internally," said Michael Walkley, a senior analyst at Canaccord Genuity
Group.
Amon said that Qualcomm has decades of experience designing
modem chips that will be hard for any rival to replicate and that the void in
the Android market left by Huawei creates new revenue opportunities for
Qualcomm.
"Just for the premium tier alone, the Huawei
addressable market is as big as the Apple opportunity is for us," Amon
said.
Another challenge for Amon, a gregarious executive who is
energetic onstage during keynote presentations, will be that Qualcom is not
well known to consumers in the way that Intel or Nvidia are, even in Qualcomm's
hometown.
"I flew into San Diego and got an Uber driver at the
airport and told him I was going to Qualcomm. He said, 'You mean the
stadium?'" Krewell said, referring to the football arena formerly home to
the San Diego Chargers.
Amon has started a new branding program for the company's
Snapdragon smartphone chips to try to change that.
"We have a mature smartphone industry today. People
care what's behind the glass," he said.
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