We woke up to the news yesterday morning that Qualcomm is acquiring privately-held Nuvia for $1.4 billion. We found this surprising because until today, Nuvia had been seen as a server CPU company. Was Qualcomm entering the data center business, again?
Once upon a time, Qualcomm had a data center business, but they exited that business several years ago, after spending a few billion dollars to develop a product that never reached commercial scale. Had they stuck with it, they would now likely have gained real traction in the market, helped by Intel’s stumbles (and here). We actually wrote about Nuvia last month. They had only come out of stealth recently, but it looked a lot like they were building an Arm-based server CPU. So today’s headline certainly caught out attention.
However, a close read of the press release paints a very different picture.
First, the words server and data center appear precisely zero times in the release. So something else is going on here.
The standout feature of today’s press release was 22 (!) customer quotes. And the first two are Microsoft and Google – big cloud service providers, right? Again, no mention of anything even remotely related to servers here. Both quotes focus on operating systems – Windows, Androids and Chrome. This can probably be read as code for consumer devices. The rest of the customers listed are handset makers (Samsung, HMD, LG, Oppo, OnePlus, Sharp, Sony, Vivo, Xiaomi), PC makers (Acer, Asus, HP, Lenovo, Panasonic) and broad-based industrial companies especially automotive suppliers (Bosch, Continental, GM, LG Electronics, Renault). This aligns directly with Qualcomm’s existing business models – mobile, PCs and cars with an emphasis on autonomous vehicles. (Interesting side note, Honor is on the list as well. This is the mobile phone business of Huawei, ostensibly spun off.)
So if this deal is not about the data center what is the strategic rationale?
The focus seems to be on “CPUs”, which we read more broadly as processors for running software on phones, PCs and cars. Qualcomm has a solid line-up of mobile processors, its Snapdragon line. What does Nuvia bring to that?
From what we can tell Nuvia probably has some design wins or other form of traction in data centers, but nothing that we know of in any of the segments that Qualcomm cares about.
Our best guess is that Qualcomm needs to beef up its ability to make advanced processors. Apple (not on the press release) now makes all of its own CPUs, and is setting the bar for performance in mobile processors, commonly known as Applications Processors (APs). In the latest benchmarks, Qualcomm’s newest Snapdragon AP not only comes in below Apple’s current N series processor, but actually lags last year’s processor. At the same time, all of Qualcomm’s leading customers, including many on this list, are building their own APs to stay competitive with Apple.
Somewhere along the line, Qualcomm lost its processor mojo. And it looks like buying Nuvia is an attempt to beef up that capability. The question of course is how did Qualcomm fall behind in what is an important product line? Qualcomm essentially invented mobile applications processors as we see them today. Snapdragon used to be the trendsetting, leading product. But once it reached steady state, that team was repurposed – to build Qualcomm’s data center CPU. When they shut down that business they lost the team and now need to re-engage.
We think the Nuvia team is highly capable and certainly brings a lot to the table. That being said, this looks a lot like a very expensive acqui-hire.
Photo by Sarah Kilian on Unsplash
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