Qualcomm Dominance Shaken

The San Diego chip maker is not the only chip supplier to world's most valuable company..

Qualcomm Inc. will no longer remain the only chip supplier to Silicon Valley tech giant, Apple Inc. Like its rival, Samsung Electronics Co., the tech titan is taking a step forward to diversify its chip suppliers for its new handset –dubbed as iPhone 7. But, the blow hasn’t been too harsh for the chip maker as expected earlier. The San Diego, Calif. firm hasn’t lost his client completely and its chips are still being installed in the handsets sold through Verizon Communications Inc.  

For the iPhones use on AT&T Inc., the tech behemoth has opted for Intel’s modem chips. Also, the latest supplier chips will also be part of the smartphones for several foreign markets. The good news for Qualcomm is that the smartphones traded in China will be run on its chip, according to the sources privy to the matter who disclosed the information on the condition of anonymity.

No representative from any company came forward to comment on the latest news.

For Intel, winning a contract from the tech leviathan itself is a big achievement. The world’s largest chipmaker has sluggish growth since PC market started to decline. It was nevertheless necessary for it to step into other markets which have been equally saturated as well. So far, it only managed to gain a single percent of market share. The latest win of Intel has sent a stifle dent on Qualcomm’s once bolstering dominance. However, the $77 billion organization was ready for such times. Earlier in April, CEO Steve Mollenkopf opined that one of its major customers is likely to diversify its supplier base. All eyes were set on Apple as company’s other major client –Samsung –has had the practice of diverse supplier base for a long time.

According to analyst at Sanford C. Bernstein, Stacy Rasgon, Qualcomm gets around $15 per phone from the tech giant which accumulated to around $3.47 billion during tech titan’s fiscal year 2015. It is likely that a step back from the once held monopoly will affect the bottom line of the company but its CEO is confident that it will bounce back in 2016 second half.

For San Diego based chipmaker, it is important to have firm grip on its business. Its stock has fallen close to 2.09% and now rests at $53.83. This year, the stock had managed to go up by 10%. It had had worst decline in the past years when a flaw in its chip ended in suspension from Samsung who opted for its in-house chip rather than Qualcomm’s Snapdragon 810.  

The current year will be important for both chipmakers –Intel and Qualcomm. An analyst at BTIG LLC, Walt Piecyk has speculated that AT&T –having Intel’s chipset –is likely to sell close to 22 million and 23 million iPhones in the current and next year respectively. On the other hand, Verizon will sell close to 21 million and 22 million iPhones in 2016 and 2017 respectively. As of now, many analysts have expressed that Qualcomm’s modem chips performance is likely to outperform Intel’s. The future will tell whether the tech giant was prudent to gamble on the sales of its core products by bringing multiple modem chip suppliers.