Qualcomm, Inc. (NASDAQ:QCOM) held 65% of the wireless (LTE) chipset market, ABI Research

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There are indications that Qualcomm, Inc. (NASDAQ:QCOM) could finish 2016 with a larger share of the baseband chipset market than it did in 2015. The main reason for the optimism is that Snapdragon 820 is promising to correct the mistakes of Snapdragon 810, thus allowing Qualcomm to regain lost wireless sockets. Nevertheless, the company  must now confront that challenge presented by its customers who are turning to produce their own modem chips in-house. Samsung is one of them.

Qualcomm, Inc. (NASDAQ:QCOM) held 65% of the wireless (LTE) chipset market at the end of 2015, according to data published by ABI Research. With the LTE market expected to grow at compound annual growth rate (CAGR) of 78.6% through 2019, Qualcomm stands to benefit from the growth thanks to its brand reputation and leading market share already.

Focus on Snapdragon 820

Qualcomm’s bet in wireless chipset market for the next several years is Snapdragon 820, which features significant improvement over the embattled Snapdragon 810. One of the greatest complaints that dogged Snapdragon 810 was that the chip used to heat, thus negatively affecting the performance of devices that it is used in. The problem with Snapdragon 810 led to some customers ditching Qualcomm’s modem chips with others returning to developing their wireless chips internally.

However, Snapdragon 820 features great improvements and there is hope that customers who may have given Qualcomm a wide berth would be happy to return to its fold. The successful rollout of Snapdragon 820 could see Qualcomm swell its share of the modem market to more than 65% it held at the end of last year.

Besides gaining more share of the market, there is also opportunity for Qualcomm, Inc. (NASDAQ:QCOM) to grow its topline significantly. That can be achieved through selling more Snapdragon 820 chips at higher average selling price given their premium nature.

The headache

Samsung has committed to use Snapdragon 820 chip in its Galaxy S7 handset. That is a clear sign that Qualcomm, Inc. (NASDAQ:QCOM) is starting to win back some of its previously lost customers. However, Samsung is unlikely to return all its modem sockets to Qualcomm as it is also building similar chips in-house. China’s Xiaomi is also drifting towards building its wireless chips internally. If these customers turn into competitors, there will be so much pressure on Qualcomm to defend and expand its market share.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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