Recently in discussions on this board, there was worry expressed that QCOM might become a big danger to SWKS as a competitor.
Well it turns out that QCOM is not only a competitor but is a big customer of SWKS. They use SWKS components in a number of their chip systems. (Yes, it’s a complicated world). For more on this, go to any recent SWKS conference call transcript and use your “find” or “search” feature - putting in QCOM or Qualcomm as the search item.
Saul
Thanks Saul for the digging. It is quite comforting to know these two companies are frenermies. Besides organic growth, QCOM acquired quite some companies to become this big, maybe it will try the same to SWKS one day, I hope not, since I see the loooong growth runway for SWKS.
Zangwei
Well it turns out that QCOM is not only a competitor but is a big customer of SWKS.
This reminds me of how my employer, BMC Software, was growing like crazy until IBM, its biggest customer, began bundling basic utilities into the operating system for free or at least hiding the costs of their products in deals so that they appeared to be free.
This started a real competitive pricing situation that led to margin compression and a precipitous fall in the stock price of BMC.
Now, IBM was fighting to keep the mainframe relevant (at the time) against a lot of competitors, and ISV costs were eating a pretty good portion of their customers’ budgets.
Qualcomm’s market position is, however, different. But if they can make chip systems that are good enough, they may cause Skyworks some problems. Nevertheless, good enough appears not not to be good enough in this business.
At least this is something to think about as the business progresses.
DJ
In the overall big picture. this kind of relationship is not uncommon and not surprising at all.
The big boys play the role and game of the patron saint of multilaterism, Klemens von Metternich, the famous Austrian statesman of the 19th century) - can’t we all get along, that is, as long as you provide something beneficial for me.
Here’s a classic example. While OEMs Apple and Samsung are engaged in a fierce battle to dominate the smartphone marketplace, Apple is not only a competitor, but a big customer of Samsung:
• Samsung made and supplied the A5, A6 and A7 processor chips for Apple’s iPhones.
• Perhaps due to legal disputes and patent lawsuits dating back to 2011 that soured the business relationship, Apple ended Samsung’s monopoly making iPhone and iPad chips by picking Taiwan Semiconductor Manufacturing Co. (TSMC) to produce A8 processors for the current iPhone 6 and iPhone 6 Plus devices. TSMC, the world’s biggest contract manufacturer of chips, happens to be Samsung’s biggest rival in chip manufacturing.
o Is Samsung out of the picture for the next A9 processor? Nope! The latest word (unconfirmed by Apple) is that Samsung has regained Apple as a customer and will make the main A9 chip in the next iPhone model. Why? The cost savings benefit for Apple by using one supplier - in this case Samsung with the backup of partner Globalfoundries - in designing the chip to fit that chipmaker’s specific manufacturing technique and not having to replicate that work elsewhere - a time consuming and costly step.
o Is TSMC going away? Nope. Now that they had a taste of Apple’s lucrative supply chain, TSMC budgeted a record $12 billion for plants and equipment.
o So Apple can now pit two rivals (Samsung and TSMC) against each other and achieve savings for its bottom line cost.
This is a highly dynamic, fiercely competitive landscape.
Regarding the RF arena, QCOM is “getting along” with current RF suppliers - SWKS, QRVO, AVGO and others - in the interim, while it continues to develop its disruptive RF technology.
Regards,
Ray