Following its blockbuster agreement with Apple, Qualcomm now commands a solid and growing leadership position in the nascent but potentially explosive market for 5G silicon.
And the company knows it.
"5G is a very good story for QCT [Qualcomm CDMA Technologies, which is essentially Qualcomm's products and services businesses, including its chipset operations] and will be a very material event in fiscal 2020," boasted Qualcomm's Cristiano Amon on the company's earnings conference call, according to a Seeking Alpha transcript of the event. "We're looking forward to having a 5G Christmas as the year ends."
For evidence, Amon said Qualcomm now counts 75 "design wins" in 5G (design wins are essentially products shipping with its silicon), which he said is more than double the number the company announced roughly a year ago.
5G is now an "incrementally larger opportunity for Qualcomm compared to 4G," Tweeted CCS Insight analyst Geoff Blaber.
Qualcomm too said it's now looking to leverage its successes in 5G smartphones into 5G in other sectors like industrial IoT and automobiles.
However, Qualcomm warned that it's facing a summer slump as it awaits 5G glories; the company slashed its chip shipment forecast for its upcoming quarter by 50 million units, to between 150 million and 170 million. Analysts had expected around 180 million.
"We are lowering our estimates … due to continued weakness in China and a lengthening of handset replacement cycles, potentially reflecting a pause in advance of 5G rollouts," explained Dave Wise, Qualcomm's finance chief, on the company's earnings call.
Also overshadowing Qualcomm's results is the lawsuit by the Federal Trade Commission that alleges Qualcomm is unfairly using its patent licenses to obtain customers for its chipsets. Qualcomm executives declined to comment on that ongoing issue.
Nonetheless, such concerns weren't able to dampen investors' enthusiasm as Qualcomm's stock largely retained gains from its deal with Apple in the hours after its quarterly earnings report.
Inside the Qualcomm-Apple-Intel soap opera
As for its new deal with Apple, Qualcomm said it will receive at least $4.5 billion from the iPhone maker in back pay due to their new settlement. And going forward, the company said it expects a $2 earnings-per-share boost from Apple.
Further, a much clearer picture is starting to emerge of Apple's decision to dump Intel and go with Qualcomm for its 5G modems.
According to Intel's CEO, the company made its decision to exit the 5G modem business in the hours after Apple announced its deal with Qualcomm. That comes as something of a surprise, given speculation that Apple's move to Qualcomm may have been sparked by Intel's decision to get out of the business.
"In light of the announcement of Apple and Qualcomm, we assessed the prospects for us to make money while delivering this technology for smartphones and concluded at the time that we just didn't see a path," Intel CEO Bob Swan told The Wall Street Journal.
Not surprisingly, Apple's 5G staffing has been in a state of flux as well. In the past few months Reuters reported that Johny Srouji, Apple's senior vice president of hardware technologies, took over the company's modem design efforts; The Information reported that Apple's previous 5G modem head, Rubén Caballero, left the company; and The Telegraph reported that Apple hired Intel's 5G development leader Umashankar Thyagarajan.
All of these actions further underscore the widespread belief that Apple is ultimately planning to build its own 5G modems, rather than purchasing them from the likes of Qualcomm or Intel. Along those lines, Apple has said it plans to open an office in San Diego and hire up to 1,000 new employees there over the coming years -- further expanding from its current headquarters in Cupertino, Calif. Although Apple is also opening new offices in other cities in the US, its interest in San Diego is notable considering the city is Qualcomm's headquarters, and Intel houses part of its Mobile and Communications Group there too.