As we pointed out earlier in the week, Qualcomm has a big number of announcements at MWC this year focused on wireless infrastructure. Qualcomm has a very mixed history in this market, so it is worth thinking through how this time may actually be different than the past.
Qualcomm is built to produce chips for high volume markets – phones and consumer electronics. By contrast, the market for wireless infrastructure is several orders of magnitude smaller – millions of units a year versus billions. This is still an attractive market, as these chips tend to carry higher prices and margins, but it has never been core to Qualcomm’s broader product strategy.
Over the years, Qualcomm has dipped its toe in the market, producing a line of chips labeled as CSM’s, in contrast to their MSM line of modems for phones. However, these past products have always been used to seed the market in early days of a new ‘G’, or generation of the wireless standard rather than a revenue driver. Qualcomm’s core strategy is to push the market to advance to new G’s as quickly as possible. In the early days of 3G and 4G, there were concerns that the equipment makers like Ericsson and Nokia were not able to get enough chips for their base stations due to lack of timely support from the traditional leaders in this field like Texas Instrument and Freescale (now part of NXP). So Qualcomm launched CSMs for those markets to help move things along. Once the new standard had sufficient momentum, Qualcomm quietly dropped out of the CSM market.
5G has been different. This version of the standard has already been around for a few years. The equipment makers have sufficient supply of the requisite chips (supply chain bottlenecks aside). Also, in many cases, the upgrade from 4G to 5G can largely be done via updates to the software in base stations. So Qualcomm did not launch 5G CSMs, they did not need to.
So it is a bit surprising to see them launch a number of initiatives around support for 5G infrastructure equipment now. The trick is that they do not seem to have actually launched any new products here. Reading through all their announcement, there is a lot of discussion of new technologies and capabilities, but no new chips. Instead, Qualcomm appears to be building a software ecosystem around its chips, to help various software vendors and operators improve the network. As we noted yesterday, many functions of the wireless network are being de-coupled from the underlying hardware. This has opened the door to new software options for the operators, and Qualcomm is looking to ensure that those solutions align with Qualcomm’s product roadmap and its ambitions for the standards. We have pointed out this gap several times in the past, and it is encouraging to see them makes these moves.
That being said, we think there is one more angle to this. While 5G is moving ahead nicely, the mmWave side of 5G is not. Our thesis holds that Qualcomm’s strategy is centered on pushing the standards forward, and mmWave is the next step in that strategy. All of Qualcomm’s infrastructure press releases explicitly mention mmWave.
Our take is that this is not only part of Qualcomm’s to push mmWave adoption forward in general. We suspect that when mmWave equipment starts to see commercial deployments (beyond 2025), Qualcomm will actually have chips to power mmWave small cells. For mmWave to work, the operators are going to need a lot of mmWave small cells. They have limited range and so for the service to be commercial, dense networks will require orders of magnitude more sites. At this scale, infrastructure products start to fit more neatly into Qualcomm’s core competency.
So while Qualcomm’s infrastructure announcements show that they want to move 5G adoption along generally, we also think they are laying the ground work for some future specific products.