2 Reasons Why Qualcomm Has Tremendous Upside Potential

2016 has been a pretty good year for Qualcomm (QCOM) as it has recovered from its last year’s errors, but it seems like the company lost an opportunity to supply its modem for the Apple’s (AAPL) upcoming iPhone 7. On the other hand, it is highly likely that Intel (INTC) will be the company to supply 4G baseband modems for the iPhone 7. However, one should also keep in mind that iPhone sales declined for the first time last quarter in the past thirteen years.
Therefore, Apple’s decision of not using Qualcomm’s modem in its upcoming iPhone will not have as big of an impact on Qualcomm as many expect.

The most significant problem for Qualcomm is gradually declining smartphone market, but Samsung’s decision to use Qualcomm’s products, like in Samsung Galaxy S7 and Galaxy S7 Edge (in some regions), might compensate for it over the next few months.

As per a report from Bloomberg, the iPhone 7, which will work on AT&T’s network, will comprise Intel’s 4G baseband modem, but Qualcomm will maintain business with Verizon Communications as well as those sold in China. Apart from these, Qualcomm has also introduced several modems specifically for Internet of Things. The company also detailed that its Snapdragon X5 and MDM9207-1 modems have acknowledged around 100 design wins from over 60 original equipment makers.

Qualcomm’s Snapdragon X5 is designed in such a way that it is compatible with both smartphones as well as Internet of Things. Moreover, Xiaomi accounts for one of the most significant smartphone manufacturers in China, and is growing rapidly. Xiaomi also uses Qualcomm’s processors and keeping in mind Xiaomi’s rapid growth; it can create problems for several companies, but will prove to be a blessing for Qualcomm.

Furthermore, Qualcomm is putting a lot of effort to provide 360-degree solutions for the connected and autonomous car segment. Qualcomm has publicized a system titled as “Halo WEVC” that is an amazing technology for on road charging of electric vehicles. The automotive industry is growing progressively, and Qualcomm’s wireless charging system will help the company to grow further in the industry.

Conclusion

With the smartphone market saturating, Qualcomm is looking to venture into several different sectors with high potential. That being said, the Samsung Galaxy S7 will help Qualcomm offset a lot of the losses from the iPhone business this year.

In the long-run, Qualcomm’s success depends on its ability to unlock the automotive market and the IoT space. However, for now, Qualcomm looks like a buy.
Published on Jul 11, 2016
By Prudent Investor

Copyrighted 2016. Content published with author's permission.

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