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Above: Qualcomm Versus Intel | Why Wait for the Internet of Everything?
Qualcomm (NASDAQ: QCOM) and Intel (NASDAQ: INTC) have been locked into processor and modem battles for years, but both companies have their own unique business segments despite some overlapping pursuits. Because of that, investors often consider one stock while looking at the other, so let us take a closer look at the strengths and weaknesses of both Qualcomm and Intel based on their long term potential.
The Case For Qualcomm
Sales of mobile processors and modems have been a driving force for Qualcomm’s revenues. Qualcomm has managed to add additional Chinese smartphone makers onto its list of customers and expand those sales. That’s come at a time when Qualcomm is just getting over some of its litigation nightmares in China concerning antitrust laws. With Qualcomm adding more China based mobile device makers, the company can continue to tap that growing market, particularly as more companies expand their list of mid-range and high-end devices. Most importantly, we can’t talk about Qualcomm’s mobile ambitions without talking about Apple (NASDAQ: AAPL). Apple released its new iPhone 7 and iPhone 7 Plus this month, and Qualcomm’s modem has a spot in some (but not all) of the iPhone devices. The rest of the modems are supplied by none other than Intel. Qualcomm was previously the exclusive modem supplier for the iPhone, so this isn’t exactly good news for Qualcomm.
The Case For Intel
Many in the tech world like to to say that Intel missed the cell phone and mobile revolution, and it’s mostly true. While Intel dominated the desktop and PC chip market, it failed to get on board with mobile devices fast enough, and Qualcomm happily took the dominant position. But some of that is changing, and the recent modem win in some of Apple’s iPhones is evidence of these changes. It is still unclear concerning exactly what percentage of new iPhones have Intel modems inside, but it is believed that Apple added Intel’s modems into the new phones despite the fact that they don’t support Sprint or Verizon Communications networks (which both work on CDMA technology). This gives Apple the leverage of having two companies competing for a spot in their mobile devices.
However, the real growth story for Intel will come from using its chips to power the Internet of Things devices and servers. Intel is pivoting away from PC processors to focus on the Internet of Things devices, servers, and data centers. Intel already has a dominant position in server chips (just over 99% in 2015), but it still remains to be seen if device makers will look to Intel for the Internet of Things devices. Thus, Intel investors will need a strong stomach to weather the company’s changes over the next few years as Intel continues its restructuring and figures out how to best use its chip expertise to build new revenue sources.
The Verdict: Qualcomm Versus Intel
Intel appears to be handling its transition away from PC computers relatively well and certainly has enough leverage with device manufacturers to gain more mobile, Internet of Things, and server business. But at the end of the day, Qualcomm’s businesses appear to have much more stability.
It is true that Qualcomm isn’t without its own problems, such as losing the iPhone exclusivity, but the company is still benefiting from its mobile processors, modem sales, and lucrative 3G and 4G patent licenses. These can’t be the only revenue drivers for Qualcomm going forward, but they should provide Qualcomm and its investors with more stability than Intel.