San Diego Business Journal

Qualcomm Plants Its Flag in 5G Territory

TECH: Move Could Put Co. in 5G Driver’s Seat By Brad Graves Originally published March 3, 2016 at 12:51 p.m., updated March 3, 2016 at 12:51 p.m.
   

— At Qualcomm Inc., the future is synonymous with five.

The San Diego company, whose research has consistently taken wireless technology forward, is banking its future on technology known in wireless business shorthand as 5G.

That stands for fifth generation. Engineers are just now working out the 5G wireless technology standard — the thing that will follow the speedy 4G standard that consumers use today. They promise 5G will sling data much faster than 4G, and contain several other improvements.

Qualcomm (Nasdaq: QCOM) is coming out of a rough year and has taken a lot of heat from tthe investment community. The company is laying off employees, cutting expenses, pursuing side opportunities such as data center chips and talking about making acquisitions to spur growth.

Future Oriented

5G is a technology that will not produce a good deal of revenue now, or even next year. In the long term, however, it promises to produce billions of dollars in revenue. Qualcomm’s stock price might not benefit from 5G until 2018 or 2019, when big wireless carriers roll out their consumer 5G networks, said Tom Sepenzis of Northland Securities.

Is Qualcomm strong enough to get there?

“Oh, yeah,” said Sepenzis. “Qualcomm is the Intel of the mobile world.”

In an extensive presentation before financial analysts in February, Qualcomm executives said they were investing capital “to expand our technology roadmap and lead in 5G.”

Qualcomm does not break out R&D expenses per project, a spokeswoman said — though the business does release total R&D expenses since its 1985 startup. That number is $39.6 billion.

Jim McGregor, principal of Tirias Research, thinks Qualcomm will have a lot to say about the 5G standard, once it is finally agreed upon.

“Qualcomm is the leader in modem and wireless technology,” McGregor said by email. “Qualcomm continues to contribute to future wireless technologies and the 3GPP standards body. So, what role will they play? Qualcomm will be instrumental in introducing new technologies for 5G and beyond, just as they have done in the past, and will likely be the first to implement the new technologies. The implementation is critical because being the first means that every wireless network in the world will be qualified using Qualcomm silicon.”

That is, all will use Qualcomm microchips.

Whatever its investment in 5G, it’s likely that Qualcomm will not see an immediate return.

5G “will not produce a significant amount of income compared to the LTE solutions shipping today,” McGregor said, “but it will put Qualcomm in the driver’s seat for 5G just as the company was in with 4G.”

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