Navigating Chip Shortages and the NVIDIA Frenzy
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Learn about NVIDIA’s meteoric rise in the GPU and AI markets and how NVIDIA's strategic positioning led the company to a $1T market value.
Volume XXV, Issue 105 |

Qualcomm stands at a strategic inflection point. The mobile chipmaker relies on Apple for nearly 20% of its revenue, but Apple is developing its own modem and will likely stop using Qualcomm chips by 2026. With its core smartphone business stagnating amid Apple’s dominance, Qualcomm must identify new avenues of growth. The company sees edge computing as its bridge to the future. In this article, L.E.K. Consulting explores Qualcomm’s history, the potential of edge computing, and whether a pivot can allow Qualcomm to continue its growth trajectory.

Qualcomm’s history: From wireless pioneer to mobile chip dominance

Founded in 1985, Qualcomm pioneered code division multiple access (CDMA) technology, allowing multiple cellular users to share spectrum bandwidth efficiently. This breakthrough enabled the transition from analog to digital networks and laid the foundation for the mobile revolution.  

Throughout the 1990s and 2000s, Qualcomm continuously innovated in wireless technologies like 3G, 4G and 5G. It also established a lucrative patent licensing business, charging royalties on its intellectual property. By the 2010s, Qualcomm was the clear leader in mobile processors. Its Snapdragon chips powered premier devices across Android smartphone makers like Samsung, Google and Xiaomi.  

However, Qualcomm also became embroiled in multiple legal skirmishes over its licensing practices. Companies argued that Qualcomm abused its dominance in critical wireless patents. Most notably, Apple sued Qualcomm in 2017 for charging excessive patent royalties. The companies ultimately settled in 2019, but the rift remained.  

The core mobile chip business, which counts Apple as a major customer, generates over half of its profits. This heavy Apple reliance puts Qualcomm in a precarious strategic position. Qualcomm’s stock price has reflected these concerns, with its valuation declining over 30% from its 2018 peak amid stagnating growth. 

Meanwhile, Qualcomm has doubled down on its investments in the connected intelligent edge. The company has focused on building core businesses in the automotive industry, networking infrastructure, the Internet of Things (IoT) and the personal computer market.  

Earlier this year, Qualcomm unveiled its new Snapdragon Elite X processor for PCs, which stems from its 2021 acquisition of Nuvia. Qualcomm claims this product outperforms the fastest laptop chips from Apple and Intel and may help Qualcomm take more share in the PC processor market. With offerings like the Elite X, it’s only a matter of time before OEMs and independent software vendors (ISVs) broaden their processor options beyond Intel and AMD. This is important so that OEMs and ISVs gain more control over their innovation cycles for future product releases.  

Qualcomm must find its next act to reignite growth and satisfy shareholders seeking improved returns. But does edge computing represent the opportunity Qualcomm needs?

The edge computing revolution

Edge computing refers to processing data near the “edge” of the network, close to the user and the originating devices, rather than sending vast amounts of data to distant centralized data centers. Edge computing enables real-time insights and actions, reduced costs, enhanced security and lower latency. 

What’s driving the edge computing explosion? Several interconnected technological and business trends: 

  • The rollout of 5G networks (and eventually 6G) with higher speeds and lower latency that can support edge computing use cases

  • Advances in Wi-Fi standards pushing more toward lower-latency machine-to-machine communications requirements

  • Proliferation of SDx that simplifies deployment of advanced enterprise networking solutions through separation of control and data planes

  • Billions of new connected IoT devices generating data that needs local processing

  • Artificial intelligence (AI) and machine learning applications that crunch data and deliver intelligence in real time

  • Cloud computing limitations like bandwidth constraints, latency and privacy concerns

  • The need for instant insights and actions in industrial environments or augmented reality

According to IDC, the edge computing market will reach $250 billion by 2024. Nearly every industry from manufacturing to retail to healthcare can benefit from decentralized computing power. Edge resources can complement cloud computing in a hybrid architecture tailored for different application requirements (see Figure 1).

Source: IDC 

Ultimately, edge computing will enable the pervasive ambient computing future.  

What is pervasive ambient computing? The embedding of computational capabilities into everyday objects to make them communicate and perform useful tasks in a way that minimizes the end user’s need to interact with computers as computers.

With powerful AI and connectivity literally built into our surroundings, digital experiences will feel seamless, responsive and available everywhere. Qualcomm sees this as the ideal environment in which its technological strengths can shine.

Qualcomm’s unique competitive advantages and potential impact 

With expertise honed over decades in mobile, Qualcomm possesses several unique advantages to capitalize on this edge opportunity: 

  • Wireless connectivity leadership that’s ideal for powering 5G edge networks 
  • Chip design and software platform skills tailored to deliver on-device edge AI  
  • Relationships across the mobile ecosystem to drive edge adoption  
  • Proven ability to scale technologies across tiers of devices and solutions  
  • Economic motivation to aggressively invest in edge, given flat mobile growth 

If Qualcomm captures even 15% of the projected $250 billion edge market, it would add over $30 billion in incremental revenue by mid-decade. This would help offset the loss of the Apple business as smartphones decline as a percentage of sales. More importantly, it positions Qualcomm as indispensable in the AI-driven ambient computing era. Qualcomm’s internal estimates present an even rosier picture:


“The opportunity at the connected intelligent edge is significant. For Qualcomm, it expands our addressable market by more than seven times to approximately $700 billion within the next decade.” 

— Qualcomm President and CEO Cristiano Amon, November 2022 (link)


Potential edge applications across industries

Qualcomm’s edge computing leadership has broad applicability across industries: 

Automotive and transportation — Qualcomm leadership says vehicles are becoming “connected computers on wheels” enabled by cloud, autonomy, new services and intelligent systems. With over $3 billion in automotive revenue, Qualcomm is already pioneering smart vehicle technologies like advanced driver assistance systems and autonomous driving via Snapdragon Ride. Its wireless and edge AI strengths align with powering innovation across automotive and transportation. 

Industrial — Factories are implementing computer vision, digital twins and predictive maintenance via edge computing. Qualcomm already works with industrial leaders like Siemens to connect equipment. Low-latency edge networks combined with on-device AI will accelerate the digitization of operations. 

Healthcare — Remote patient monitoring, wearable medical devices and robot-assisted surgery will rely on edge connectivity and intelligence. With edge, patient data can be analyzed locally to enable real-time clinical insights. Qualcomm has invested in healthcare through partnerships with hospitals and medical technology companies. 

Retail — Retailers are using edge computing to enable computer-vision-based capabilities like self-checkout, smart warehouses and inventory optimization. Qualcomm is working with retail tech providers to deliver these next-generation retail experiences. 

Generative AI — Models like DALL-E and GPT-3 need efficient on-device processing as they are deployed across consumer and enterprise apps. Qualcomm’s edge AI can enable real-time local inferencing of these emerging models instead of the cloud, reducing costs, improving privacy/security and expanding access.

The future with Qualcomm as edge leader 

The shift to edge computing is a promising opportunity for Qualcomm to diversify beyond wireless into higher-growth markets. By aggressively pursuing edge, Qualcomm can extend its dominance in mobile into broader ambient computing. Its technology innovations will shape how enterprises access and benefit from localized AI. 

When Apple takes its modem business elsewhere, Qualcomm will adapt and prosper by leading the new era of intelligent edge computing. With the right technology investments made today, Qualcomm’s next chapter promises to be even more transformative than its first. The world’s transition to ubiquitous smart technology depends on companies with Qualcomm’s proven ability to scale across virtually every connected device. 

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L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2023 L.E.K. Consulting LLC


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