Qualcomm to Enter PC Chipset Market Next Year

Qualcomm’s (NASDAQ:QCOM) CEO, Paul Jacobs, announced at an investor meeting yesterday that the company is working with Microsoft to bring out a Snapdragon-powered Windows PC a year from now. ^[1] Microsoft (NASDAQ:MSFT) is working on a new version of Windows, Windows 8, that will work on all mobile devices, including smartphones and tablets, as well as on the traditional PCs. Qualcomm has already been supporting the Windows Phone 7 platform on Nokia’s (NYSE:NOK) newly launched Lumia smartphones that are powered by the company’s Snapdragon processor and plans on continuing to do so for more of Nokia’s smartphones in the future.

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Opportunities

Majority of PCs around the world currently support the x86 architecture, an architecture that the dominant player in the PC market, Intel (NASDAQ:INTC), had engineered. Qualcomm’s Snapdragon processors work on ARM architecture and power many of the popular smartphones and tablets. Up until now, no platform had ventured to bridge both these worlds but Microsoft plans on doing so with its next-generation Windows 8 and Qualcomm sees a great opportunity there to enter the lucrative PC world, continuing on its present association with Microsoft. With Intel also looking to enter the mobile device market next year, competition in both the PC and mobile market is going to increase with players on both sides trying to gain control over everything from smartphones to notebooks.

Currently there are not many ARM based processors powering PCs. And Intel controls over 86% of the market, according to Trefis estimates. However, growing demand for PCs and other devices to behave more like phones will give mobile-chipset manufacturers like Qualcomm an edge going ahead. The ARM technology allows chips to sacrifice processing power for features such as constant Internet connectivity, fast start-up times and long battery life, features that users addicted to their smartphones increasingly want in their PCs now. Also, most developers are focused on making applications for mobile devices, which currently use ARM chips.

Processors based on the ARM architecture, such as Snapdragon, are expected to make up more than 13% of the PC chip market by 2015, according to a report by IDC. ^[2]

Risks

Although the opportunities are immense, ARM based chipsets have so far not achieved much traction in the PC market. Today, ARM-based netbooks are in small volumes and the processors inside aren’t designed for PCs. The processors may be energy-efficient but they lack the raw power a x86 architecture based chip, like Intel’s, affords. Qualcomm will be hoping to change all that by working closely with a PC software giant like Microsoft to design its chipset specifically for Windows 8, that will also run on the ARM architecture.

Power aside, there is also the problem of portability of older x86 based programs onto the new ARM architecture. Legacy applications, which run on x86 architecture from Intel and AMD, are based on a large library of programs written specifically for the x86 architecture and will hence not work with ARM-based chips. However, this may not be a big problem if Qualcomm manages to re-write most of the key applications for Windows on the ARM architecture.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Qualcomm sees Snapdragon-powered PCs by late 2012, CNET, November 16, 2011 [↩]
2. Worldwide PC Microprocessor Unit Shipments Up 7.4% Year Over Year in the First Quarter of 2011, IDC Press release, May 5th, 2011 [↩]