Broadcom Corporation (BRCM) vs. QUALCOMM, Inc. (QCOM): Which One of These Semiconductor Stocks Is Worth Buying?

Broadcom Corporation (NASDAQ:BRCM) began shipping its fifth generation, or 5G, WiFi family of semiconductors last year. The 5G technology helps wireless devices work faster and carries signals farther with reduced battery drain than previous generations, Broadcom Corporation (NASDAQ:BRCM) said. The company also expanded its wireless product portfolio with NFC quad-core chips, which target growth in mass market mobile phones as well as high-end mobile phones and devices.

Broadcom (BRCM)

Broadcom Corporation (NASDAQ:BRCM) closed its fiscal 2012 with an 8% increase in annual revenue as it gained additional market share in all of its business segments — connectivity and baseband, network solutions, and broadband. This article explains why Broadcom Corporation (NASDAQ:BRCM) is relatively undervalued than arch-rival QUALCOMM, Inc. (NASDAQ:QCOM), and therefore offers a better investment proposition.

The wireless semiconductor market

The wireless semiconductor market is made up of two different markets:

1. Mobile baseband chipsets and application processors market

2. The wireless connectivity solutions market

Broadcom leads the wireless connectivity segment

Broadcom Corporation (NASDAQ:BRCM) is the leader in the wireless connectivity segment with approximately 35% market share. This is the fastest growing segment in the wider semiconductor market. The opportunity in wireless connectivity is primarily driven by the growth of mobile devices. Broadcom’s market share in mobility is 90%, which comprises WiFi, Bluetooth, FM, and GPS solutions solely for mobile platforms. Almost all high-end smartphones use Broadcom Corporation (NASDAQ:BRCM)’s connectivity solutions.

The company has enjoyed major success with its connectivity solutions in smartphones, most notably the main WLAN slot in the iPhone. Broadcom shipped around 200 million connectivity combos in Q4 2012 alone, and its wireless connectivity solutions grew faster than its overall mobile and wireless business in 2012.

Broadcom says that it has invented a chip that can tell your phone where you are all the time without quickly draining your battery. The BCM47521 chip will make it easier to use apps that react to the user’s location. That could include tools that mute an employee’s ringer when they enter the office, send a text message when a child leaves school, or tell a retailer when a loyal shopper is near a store.

Broadcom also claims that it has the industry’s smallest 4G LTE-Advanced modem, theBCM21892. The modem is said to support LTE FDD and TDD, LTE-Advanced with carrier aggregation, HSPA+, TD-SCDMA, and EDGE/GSM. It also supports Band 41 TD-LTE, used by Clearwire, China Mobile, and SoftBank.

Qualcomm leads the baseband and application processors market

QUALCOMM, Inc. (NASDAQ:QCOM) is the leading player in the cellular baseband market with more than 40% market share. QUALCOMM, Inc. (NASDAQ:QCOM) also leads the mobile application processors market with roughly 50% market share in terms of revenue.

QUALCOMM, Inc. (NASDAQ:QCOM) announced Snapdragon 200 and 400 processors aimed at mid-tier and entry-level smartphones. Expected in handsets later this year, the Snapdragon 200 and 400 will balance the high-end 600 and 800 processors introduced in January.

QUALCOMM, Inc. (NASDAQ:QCOM) faces fierce competition from rival NVIDIA Corporation (NASDAQ: NVDA). Many of Qualcomm’s Snapdragon chips integrate LTE into a single chip. By contrast, NVIDIA’s newly announced Tegra 4 uses a separate, standalone LTE chipset, the fifth-generation NVIDIA Icera i500 processor.

NVIDIA’s newly announced Tegra 4i chip will also integrate the Icera i500 modem on-die. It will support 8 primary bands and both 2×2 MIMO and 4×4 MIMO transmission modes on LTE. NVIDIA says the chip will be available in 2014.

Broadcom vs. Qualcomm: The verdict

BRCM Price / Book Value data by YCharts

Broadcom has a market cap of $17.31 billion with a PE multiple of 26.8, while Qualcomm’s market cap is $113.35 billion with a PE multiple of 17.4. Although Broadcom appears to be richly valued in terms of the PE multiple, the company is attractively valued than QUALCOMM, Inc. (NASDAQ:QCOM) in terms of both Price to Book and Price to Sales ratios.

With Broadcom operating in the high growth segment of the wireless semiconductor market, I feel Broadcom is a better investment opportunity than Qualcomm at the current price.

Anindya Batabyal has no position in any stocks mentioned. The Motley Fool recommends NVIDIA. The Motley Fool owns shares of Qualcomm.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!