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Qualcomm (NASDAQ:QCOM) is the market leader in the cellular baseband market and competes with MediaTek, Texas Instruments (NASDAQ:TXN), Broadcom (NASDAQ:BRCM), Marvell (NASDAQ:MRVL), Freescale and Infineon (OTCQX:IFNNY). Cellular basebands are the core chipsets used in mobile phones to handle voice / data communication to and from wireless devices.

Qualcomm also sells other chipsets used for power management, Bluetooth connectivity and application processing. For example, Qualcomm’s Snapdragon application processor is used to give mobile phones computing power for handling mobile phone software and applications.

We estimate that the mobile phone chipset business constitutes 43% of the $42 Trefis price estimate for Qualcomm’s stock. The company’s ability to maintain share in the cellular baseband market, where it is facing increasing competition, will be crucial for Qualcomm’s chipset business and can have a significant impact on Qualcomm’s stock.

Cellular Baseband Most Important Part of Qualcomm’s Chipset Businesss

According the market research firm Strategy Analytics, Qualcomm had a revenue share of 38% in the $11 billion cellular baseband market in 2009. This implies that 67% (or $4.2 billion) of Qualcomm’s $6.3 billion of chipset revenue in 2009 came from the cellular baseband market, making cellular basebands the most important component of Qualcomm’s chipset business.

Can Qualcomm Sustain Cellular Baseband Market Share?

We estimate that Qualcomm’s share in CDMA mobile phone chipset market will decline from 68% in 2009 to 61% by the end of Trefis forecast period.

We believe it may be difficult for Qualcomm to sustain historical market share levels for two reasons:

1. Qualcomm customers Nokia and Samsung are diversifying their chipset suppliers

Nokia (NYSE:NOK) and Samsung together command a share of around 60% of the global mobile phone market. These companies have started diversifying their chipset supplier base so as to avoid dependency on a single chipset vendor. This will benefit niche players like Broadcom over Qualcomm. Strategy Analytics estimates that Broadcom’s cellular baseband revenue grew 350% in 2009 and the company is increasingly supplying both Samsung and Nokia.

2. Infineon is gaining momentum by supplying chipsets for Apple’s popular iPhone

Infineon has gained momentum by becoming the supplier of chipsets for Apple’s popular 3G iPhone and has around 11% market share in the cellular baseband market. iPhone currently has 2% market share in the global mobile phone market, but is expected to show tremendous growth.

You can modify our forecasts for Qualcomm CDMA Chipset market share to see how Qualcomm’s stock will be impacted the company’s chipset market share declines were greater than we forecast.

For additional analysis and forecasts, here is our complete model for Qualcomm’s stock.

Disclosure: No positions

Source: Cellular Baseband Market Share Crucial for Qualcomm