Three-fold threat to Qualcomm in the China marke：
1.Taiwan’s MediaTek and other lower-cost providers could derail Qualcomm’s sales.
对手低价芯片将阻碍高通在华销售。
2.China could bring down Qualcomm’s average selling price.
中国低价手机大行其道，将拉低高通产品售价。
3.China’s regulators could impose harsh requirements on Qualcomm.
中国监管单位可能对高通施加严苛要求。
然多头Bernstein明显非常不以为然。
Most competitors for the China market are well behind Qualcomm on integration, geometry, and radio technology, and Qualcomm holds the majority of sockets currently certified for use on China Mobile’s forthcoming LTE network. Of the primary competitive candidates, MediaTek is likely the most viable (and fierce) competitor, and understands well how to do business in China. However, Qualcomm’s challenges on 3G have been, in our opinion, more on marketing to the Chinese consumer than anything else. And, it appears Qualcomm is now getting much more responsive to the demands of Chinese market. Despite previously deriding octa-core chips as a marketing gimmick, Qualcomm is fully embracing the multi-core trends, announcing its own octa-core chip, the Snapdragon 615 (or MSM8939) at the MWC. The chip clearly is aimed to counter MediaTek’s success in the octa-core segment, and is targeted at the mid range. Similarly, in another marketing effort Qualcomm is targeting their first 64 bit chip (the Snapdragon 410 MSM8916) designed specifically for the needs of the lower-end China market, delivering high performance into lower end segments at attractive price points.
Fears of ASP decline have been part and parcel with Qualcomm ever since the “Great ASP Debacle” of 2010. However, mix to emerging markets is not new; QCOM’s QTL unit growth has been driven by this shift for years. ASPs have increased markedly since that time, even as emerging market growth has substantially outpaced unit growth in developed markets, more than offsetting negative mix as the smartphone cycle continued apace.
As the 4G market, over the next few years, potentially transitions here we would love to see QCOM put a framework in place to capture payments; even if at a lower rate we believe they would still be substantially accretive as this large “shadow volume” of 3G moves over into royalty-bearing mode. We estimate substantial accretive contribution from China Mobile LTE to Qualcomm’s royalties as a result, even if it comes at a lower rate. The push toward 5-mode chipsets may help with this Additionally, it appears that Qualcomm is upping their engagement with China. We note recent news that Qualcomm is engaging with SMIC for 28nm products. While Qualcomm has indicated they will be upping their foundry multi-sourcing efforts, we were somewhat surprised to see SMIC mentioned at least in the guise of 28nm, and SMICs inferior capabilities vs. TSMC or Samsung all suggest limited benefits to QCOM from a strict multi-sourcing perspective (benefits on pricing, flex capacity, etc). Benefits to Qualcomm from assuaging China, however, could in theory be much more substantial, and the timing of the newsflow (in the middle of the investigation) suggests other motives may indeed be at play.
- Stacy Rasgon of Bernstein Research
