Entering text into the input field will update the search result below

QRD:Qualcomm's Secret Weapon

May 06, 2011 11:48 AM ETQCOM
dreamingboy profile picture
dreamingboy's Blog
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

                                               Brief Introduction
Purpose: As the coming of commoditization of smartphone is inevitable, Qualcomm needs to prevent the replay of MediaTek in smartphone. Once MediaTek dominates the middle-to-low-end smartphone, it can attack high-end market. Qualcomm develops QRD(Qualcomm Reference Design), a turnkey total solution, and stores it in warehouse, being ready to give low-cost chipset vendors such as MediaTek a deadly blow.
Progress: This project has been going on for several years in low key. Hundreds of engineers have been put on this project in both Shanghai and Beijing. 7227, a low-end smartphone chipset, is the present main working platform.
Pyramid Infrastructure: Top layer is occupied by Qualcomm who is responsible for pushing the whole project, leading in reference design, and providing technical and capital support. The second layer is occupied by design house. Unlike design house in era of featurephone, design house for  QRD can be categorized into two types, hardware design house and software design house. The former concentrates on the design of PCB while the latter focuses on software platform. The third layer is taken by third-party application integrators who integrate diversified internet applications and offer them to consumers. The fourth layer is taken by thousands of SME of handset making who are expected to leverage their low cost and rapid response to market demand to boost the huge growth of smartphones in developing countries.
Ideally, Qualcomm will be one of two dominants of industry chain once QRD makes success. If MediaTek intends to grab a potential client, Qualcomm will show the client the same or even better solution with the same price. The relationship of Qualcomm and MediaTek may be much like that of Intel and Via.
Software Design House: Thanks to the severe shortage of human resources in the field of Linux, especially Linux Kernel for portable devices, software design houses will probably be the second largest beneficiary from QRD and maintain their competitive advantages of close relationship with Qualcomm, scalability, wide adoption, and rich experience. What they ought to do now is to take actions to get as many Linux talents as possible as a preparation for the boom of low-cost Android smartphone. These actions include recruiting present Linux talents and fostering new talents in training schools. Pay attention to these companies which deserve investments.
The average cost of labor of Qualcomm is much higher than that of MediaTek. Is QRD feasible?
A1: Although labor cost of Qualcomm is high, Qualcomm does not provide turnkey solution only by itself. Instead, it chooses to cooperate with Chinese software design houses which can leverage the cost of Chinese engineers to make customization.
Q2: Will QRD pull down the price of smartphone very soon?
A2: No. Qualcomm won't employ a strategy of "attack" by QRD because it will harm Qualcomm's profits. Qualcomm regards QRD as a defensive weapon to beat low-cost chipset vendors.
Q3: Would frequent update of Android version be a threat to QRD?
A3: Frequent update of chipset and operating system can be a threat to QRD, bringing about an incremental cost of redesign and debugging. However, as chipset and OS become more and more mature, update will slow down and hence the cost will accordingly decline.
Q4: The entry fee for handset maker is high. Can it fall in future?
A4: Of course. The entry fee is usually high at the beginning but will fall rapidly if more and more participants recognize the value.
Q5: Will MediaTek vertically integrate design house and respond more quickly and cheaply than Qualcomm?
A5: Theoretically, MediaTek can leverage its advantage in culture and management to integrate Chinese design house as it ever did in Shanzhaiji. However, unlike the enclosed ecosystem of featurephone, the open ecosystem of smartphone needs professional division of labor and massive innovation. Vertical integration may not be a good solution, which can be observed from the history of PC.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.