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Sarah Tew/CNET
NEW YORK — Qualcomm, the world’s biggest maker of chips for mobile devices, is under a lot of pressure from its competitors these days.
It’s seen its Snapdragon processor replaced by a Samsung-made chip in Samsung’s flagship Galaxy S6 phones — a switch that’s costing Qualcomm hundreds of millions of dollars in sales. At the same time, it’s had to fend off increased competition from Intel and from makers of lower-end chips in Asia. The challenges have helped push Qualcomm’s stock down about 8 percent since the start of the year and depressed its financial results.
Despite the difficulties, Executive Chairman Paul Jacobs said in an interview with a handful of reporters Tuesday that his company has a clear path forward out of the woods, and he welcomed the heightened competition to ensure that Qualcomm keeps fighting to maintain its lead.
“Competition is good,” Jacobs said soon after the company’s partner, LG, held an event here to unveil its new flagship G4 phone. “It’s the silver lining of what’s been going on with the Samsung situation. I think it’s a good wake-up call.”
Qualcomm remains the dominant player in mobile chips, with its Snapdragon processors, radio chips or both finding a home in Apple’s iPhone, Samsung’s Galaxy Note 4 phone, HTC’s One M9 phone, as well as many other devices. The arrival of more viable competitors in its market, though, could mean more choices for device makers and consumers.
To keep hold of the majority of the market for smartphone chips, Qualcomm plans to direct its roughly $5 billion annual research and development budget toward a handful of specific projects, so it can keep coming out with the most desirable technology, Jacobs said. Consumers might expect to see new technologies in the realms of virtual reality and robotics, as well as smartphone chips that can learn their owner’s interests. Those are major areas of research for Qualcomm, said Jacobs, the company’s CEO from 2005 to 2014 who now focuses on new technologies and long-term projects.
“What we’re really going to do is focus in on some of the high-impact things,” Jacobs said, “and a few of the other projects. We’re going to do a little gardening.”
That will mean the company will continue cutting costs — it already laid off about 600 employees in December — while still driving its technology forward, Jacobs said.
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The pain for Qualcomm may last awhile, Susquehanna Financial analyst Chris Caso wrote in a recent note he titled “Samsungeddon.” Even if Qualcomm wins back business it lost this year, it’s likely to do so at much lower prices, he said, because of the greater competition out there.
Qualcomm could try to avoid that fate by pushing for higher-end features that its competitors don’t have and that it can sell at a premium. A hint at what’s to come soon from Qualcomm is its Zeroth , revealed in March, which could make a smartphone anticipate a user’s needs before being prompted and uses behavioral analysis to make itself more secure. Zeroth will be a part of Qualcomm’s new Snapdragon 820, which should arrive in phones next year.
Qualcomm may try to use that platform to help it regain Samsung as a customer and also stay one step ahead of its competitors. But it’s unlikely its rivals will be slowing down.
“You get this focus on product-cycle issues, and people get down on the company,” Jacobs said Tuesday. “But the company’s got incredible technology, great partnerships. I think things are good at the company, but there’s definitely work to do.”
