Qualcomm (NASDAQ:QCOM) recently announced its fiscal year earnings and highlighted that the company will start commercial production of a multimode chipset that will enable mobile phone users to transition from 3G to LTE technology.
The 3G to LTE transition is underway globally with 156 operators in 64 countries currently investing in this transition.  In the US, Verizon (NYSE:VZ) is rolling out its LTE network and AT&T (NYSE:T) plans to start its roll out in mid-2011. LTE networks will offer faster data download speeds for mobile users.
We believe that the multimode chip can give Qualcomm an edge versus competitors such as MediaTek, Texas Instruments (NYSE:TXN), Broadcom (NASDAQ:BRCM), Marvell (NASDAQ:MRVL), Freescale and Intel (NASDAQ:INTC), which acquired Infineon’s wireless division.
We currently expect Qualcomm’s CDMA market share to decline to 60% by 2016, but if it can maintain its current 69% with these new chips, this adds around 7% upside to our current price estimate of $49.93.
3G to LTE Transition Underway
LTE, which stands for Long Term Evolution, is the 4G technology that will enable faster data transmission speeds to mobile devices. Verizon, which is in the process of upgrading its network to LTE, claims that the technology is capable of peak download speeds of 40 to 50 Mbps and peak upload speeds of 20 to 25 Mbps .
This transition is speeding up especially in developed markets. According to Global mobile Suppliers Association (GSA) , 113 operators in 46 countries have confirmed to deploy commercial LTE systems, which is an increase of 49 operators in the past 6 months.
In its recent conference call, Qualcomm mentioned that it expects to see the first commercial chips by 2010 year-end.  Since 3G is based primarily on CDMA technology, the new multimode chipsets give Qualcomm an advantage. We believe this can help Qualcomm maintain CDMA market share while it grows with the LTE market.
Although we currently forecast that Qualcomm will continue to lose share in the CDMA chipset market from 69% in 2009 to 60% by 2016, we could see 7% upside to the $50 Trefis price estimate for Qualcomm if it can sustain market share at 69%.
- According to Global Mobile Suppliers Association (GSA)
- Verizon boasts trial LTE speeds
- Fiscal year ending 2010 earnings conference call
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