Is This Inflection Point Good for QUALCOMM, Inc. (QCOM)?

A big ramp
Qualcomm brings in less royalties from China Mobile’s unique TD-SCDMA standard relative to traditional CDMA and WCDMA networks, but the company has also recently launched baseband chips that are compatible with TD-SCDMA.

Another contributing factor to broader 3G adoption is that Qualcomm has begun focusing on selling its smartphone reference designs, which make it easier and faster for OEMs to bring devices to market. Rasgon thinks that there was a strong correlation between these two developments, while acknowledging there may not be causality. Still, there’s a high likelihood that Qualcomm’s heavy promotion of its designs is having some positive impact.

Overall, the 3G ramp in China remains nascent, with only 23% of device sales in China supporting 3G. That’s in line with the 21% estimate of 3G penetration of all subscribers that my data shows. As adoption continues to accelerate, Rasgon is modeling for Qualcomm to bring in an additional $2.4 billion to $5 billion in revenue from China by 2015.

While parts of the developed world are moving on to 4G LTE, nearly 80% of Qualcomm’s baseband shipments are still older generations. Having the biggest smartphone market in the world continuing to transition to a standard where Qualcomm stands to profit is definitely a good thing.

The article Is This Inflection Point Good for Qualcomm? originally appeared on and is written by Evan Niu, CFA.

Fool contributor Evan Niu, CFA, owns shares of Qualcomm. The Motley Fool owns shares of China Mobile and Qualcomm.

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