Qualcomm’s new CEO sees dominance in laptop markets

July 1 (Reuters) – The new head of Qualcomm Inc (QCOM.O) believes that by next year his company will have just the chip for laptop makers wondering how they can compete with Apple Inc ( AAPL.O), which introduced laptops last year using a custom-designed central processor chip that provides longer battery life.

Longtime processor suppliers Intel Corp (INTC.O) and Advanced Micro Devices (AMD.O) don’t have chips as energy efficient as Apple’s. Qualcomm chief executive Cristiano Amon told Reuters on Thursday he believed his company could have the best chip on the market, with the help of a team of chip architects who previously worked on the Apple chip. but who now work at Qualcomm.

In his first interview since taking a leadership role at San Diego, California-based Qualcomm, Amon also said the company is also relying on revenue growth from China to fuel its core chip business for smartphones despite political tensions.

“We are going to grow in China,” he said, noting that the US sanctions against Huawei Technologies Co Ltd (HWT.UL) give Qualcomm an opportunity to generate much more revenue.

Amon said the cornerstone of their strategy came from a lesson learned in the smartphone chip market: providing modem chips for wireless data connectivity to phones was not enough. Qualcomm also needed to provide the brains to turn the phone into a computer, which it now does for most high-end Android devices.

Now, as Qualcomm looks to bring 5G connectivity to laptops, it is pairing modems with a powerful central processing unit, or CPU, Amon said. Instead of using the basic compute blueprints of longtime partner Arm Ltd, as it now does for smartphones, Qualcomm concluded that it needed custom-designed chips if its customers were to compete with the newer computers. Apple laptops.

As head of Qualcomm’s chip division, Amon this year led the $ 1.4 billion acquisition of startup Nuvia, whose former Apple founders are helping design some of these chips for Apple laptops. before leaving to form the startup. Qualcom will start selling Nuvia-based laptop chips next year.

“We needed to have the best performance for a battery powered device,” Amon said. “If Arm, who we’ve had a relationship with for years, ultimately develops a better processor than we can build on our own, then we still have the option of licensing Arm.”

Arm is in the process of being acquired by Nvidia Corp (NVDA.O) for $ 40 billion, a merger that Qualcomm has opposed with regulators.

Amon said Qualcomm has no plans to create its own products to enter the other big processor market – data centers for cloud computing companies. But it will license Nuvia’s designs to cloud companies who want to build their own chips, which could put it in competition with parts of Arm.

“We are more than willing to leverage Nuvia’s CPU resources to partner with interested companies as they develop their data center solutions,” said Amon.

BRAND CHALLENGE

Phone chips accounted for $ 12.8 billion of its 16.5 billion chip revenue in its most recent fiscal year. Some of Qualcomm’s best customers, such as phone maker Xiaomi Corp (1810.HK), are in China.

Qualcomm expects revenue growth as its Android phone customers pounce on former phone users from Huawei, which has been forced out of the cellphone market by Washington sanctions.

Kevin Krewell, senior analyst at TIRIAS Research, called it a “political minefield” due to rising US-China tensions. But Amon said the company could do business as usual there.

“We license our technology – we don’t have to do any forced joint ventures with technology transfers. Our customers in China are aware of their agreements, so you see the respect for US intellectual property,” a- he declared.

Another major challenge for Amon will be hanging on to Apple as a customer. Qualcomm’s modem chips are now featured in all Apple iPhone 12 models after a deadly legal battle. Apple sued Qualcomm in 2017, but ultimately dropped its claims and signed chip supply and patent licensing agreements with Qualcomm in 2019.

Apple is currently designing chips to replace Qualcomm’s communication chips in iPhones.

“The biggest overhang for Qualcomm’s long-term stock multiple is the concern that right now it’s as good as it gets, as they ship in all iPhones, but someday Apple will make these. chips internally, ”said Michael Walkley, senior analyst at Canaccord Genuity Group.

Amon said Qualcomm has decades of experience in designing modem chips that will be difficult for any rival to replicate and that the vacuum Huawei left in the Android market creates new revenue opportunities for Qualcomm.

“At the premium level alone, Huawei’s addressable market is as important as the Apple opportunity to us,” Amon said.

Another challenge for Amon, a gregarious executive who is energetic on stage during keynote presentations, will be that Qualcom is not well known to consumers like Intel or Nvidia, even in Qualcomm’s hometown.

“I flew to San Diego and got an Uber driver at the airport and told him I was going to Qualcomm. He said, ‘You mean the stadium? “” said Krewell, referring to the football arena that once housed the San Diego Chargers.

Amon has launched 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 about what’s behind the glass,” he said.

(This story is passed on to add the missing words to paragraph 19)

Reporting by Stephen Nellis in San Francisco; Editing by David Gregorio

Our Standards: Thomson Reuters Trust Principles.