Qualcomm Is a 5G Winner. Here's Why the Company's New CEO Is So Bullish on the Future. -- Barrons.co | QCOM Message Board Posts

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Msg  179 of 186  at  5/7/2021 8:47:59 PM  by


Qualcomm Is a 5G Winner. Here's Why the Company's New CEO Is So Bullish on the Future. -- Barrons.com

May 7, 2021 (Dow Jones)
By Eric J. Savitz 

Cristiano Amon, the CEO-elect of mobile-phone chip maker Qualcomm , rubs his hands in glee when you ask him to talk about 5G. And for good reason: The speedy new wireless standard is creating boom times for his San Diego--based company, which reported 52% revenue growth in its latest quarter.

Next month, the bearded, bespectacled Brazilian, a 25-year veteran of Qualcomm (ticker: QCOM), is taking over the top job from retiring CEO Steve Mollenkopf. Amon has been Qualcomm's president since 2018, spending much of his time promoting 5G. The effort seems to be working.

Amon says carriers are rushing to add 5G capacity to their networks, which provides them with lower costs per bit and better service for consumers. I spoke to Amon at length this past week for my new monthly video series -- Tech Trader on Barron's Live. He says carriers have accelerated their infrastructure rollout during the pandemic, taking advantage of empty city centers to install new towers and antennas. Some telcos accelerated their rollout by several quarters, Amon says, also driven by growing demand for broadband during the quarantine.

"5G is doing great," Amon told me. "It has stayed consistent with our expectations. And it proved to be resilient to the pandemic. We're on track to have a half-billion 5G devices on the network in 2021 -- and we're still in the first inning of the 5G game." He adds that by the end of 2021, there should be "pervasive coverage in a majority of developed markets."

Here are some of the highlights from our conversation about 5G and the state of the chip industry. (You can watch the full interview in the video section of barrons.com.):

It's great for video: While 4G speeds have been sufficient for reliable music streaming, video on the go has still suffered. At 4G speeds, Amon says, "only a small percentage of video is rendered at the maximum possible bit rate." Video quality, in other words, is often terrible at 4G speeds. Amon thinks that 5G will do for video what 4G did for music. He says you'll be able to watch video at maximum resolution 95% of the time. He also sees huge improvement in upload speeds. "Everyone can be a broadcaster," Amon says.

No more data caps: Data caps have been common with 4G networks, pushing consumers to search for Wi-Fi to avoid data surcharges. But 5G's efficiency changes the equation. "5G is designed for you to be connected 100% of the time without worrying about how much data you've transferred, " he says.

Gaming 2.0: Amon thinks 5G sets the stage for dramatic changes in video gaming. For one thing, the low latency of 5G makes for better game play -- he thinks the mobile experience will match that of console games. And he contends that the need for dedicated set-top game consoles is going away. "This will do for gaming what Netflix did for video," he says. "You can stream games directly from the cloud. Every TV can play console-quality games. It expands the addressable market."

On-demand computing: It's not just gaming. Amon predicts that access to low-latency, high-speed networks will enable access to applications previously limited to high-end workstations. The 5G pipe can connect local devices to powerful computers in the cloud. Amon sees a PC revolution, with expanded use of resource-intense applications like computer-aided design and simulations, all from basic laptops.

Connected cars: Amon says Qualcomm works with 23 of the 26 global car brands, and it's getting close on No. 24. He says electric cars are basically a "skateboard chassis with batteries on the bottom and a computer on wheels." With a 5G connection, he says, cars become a market for video programming, games, advertising, and new insurance services. He thinks we're approaching a time when auto manufacturers make more money from services during a car's life span than from the sale of the car itself. And he thinks advanced driver assistance systems, or ADAS, for collision avoidance, parking, and other semi-autonomous operations will be as widespread in cars as antilock brakes.

Huawei's pain is Qualcomm's gain: The U.S. sanctions on Huawei, Amon says, have created disruption in the handset supply chain, opening up a 200 million unit opportunity for other phone makers like Xiaomi, Oppo, and Vivo. "We're the big winner in that opportunity," he says, supplying components to the upstarts. On the other hand, Amon notes that every kind of chip is currently in short supply as a result of tight manufacturing capacity. "If you are a semiconductor company and not short, you should be worried." Qualcomm is still benefiting from strong foundry relationships, he adds, which should get the company's supply "very close to demand" by the end of 2021.

Bring on the fabs: Amon says Qualcomm welcomes the news that Intel (INTC) is committed to becoming a foundry and investing in semiconductor manufacturing. "We support that. We're excited about that. It takes a number of years, and it won't happen overnight, but it is welcome news for the industry."

Meanwhile, Amon supports the U.S. government push to add more domestic chip-making capacity. "Without semiconductors, you can't produce phones, or F-150s, or computers," he says. "The U.S. has an incredible semiconductor industry....Securing this critical supply is a big deal. More manufacturing onshore is a good thing. Everybody wins."


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