Qualcomm set for battle over electronic chips

Qualcomm Inc, the world's most valued semiconductor company, is preparing for more intense competition in China in 2013 as the country becomes the world's largest smartphone market, company Chairman and CEO Paul Jacobs said on Tuesday.

He added that Intel Corp "has potential to be a big competitor" in the long run, but it will have a limited effect on Qualcomm's business this year.

Chinese customers have the most diversified requirements for smartphones in areas such as online entertainment and social networking, according to the CEO.

The biggest challenge for Qualcomm is to continue to bring down the cost of making chips while increasing new features to meet the diversified needs of Chinese customers, he said.

China became Qualcomm's largest market in terms of revenue in fiscal year 2011. The market contributed more than one-third of the company's revenues.

The research company International Data Corp predicted that the shipment of smartphones in China could hit 300 million in 2013, an increase of 44 percent year-on-year. It added that the total number of smartphone users in China may reach 500 million.

Qualcomm said it had shipped about 500 million mobile chips in 2012, but did not disclose sales in the Chinese market.

Local smartphone makers, including ZTE Corp, Lenovo Group and Huawei Technologies Co, are rolling out devices using chips made by the US company.

"China's smartphone market grew significantly in volume in 2012 and it will directly benefit Qualcomm, which owns a large customer base in the country," according to Nicole Peng, research director at IT research company Canalys China. She added China is expected to contribute higher revenues for Qualcomm.

However, competition among mobile chip makers is set to intensify as companies such as Intel are vigorously pushing the mobile initiative.

Intel re-entered the mobile chip making sector last year due to declining business in the global personal computer industry.

In November, Intel announced it would ship 22-nanometer chips for smartphones in 2013. The new product will directly compete with Qualcomm's chips.

"The structure of the mobile market is quite different from the PC market. We have started from the mobile space and focused on power consumption and a high degree of integration of multiple technologies," Jacobs said, suggesting Qualcomm's technology edge will keep the company ahead of competitors such as Intel.

In the short term, Intel will continue to play catch-up in the world of low power processors and in the smartphone market, where Qualcomm dominates, Peng said.

"The competition in the mobile processor market is highly intense, and Intel has more competitors in addition to Qualcomm."

Qualcomm was optimistic about its business despite the mounting threats.

The company expects its revenues for fiscal year 2013 to hit $23 billion to $24 billion, up from $19.12 billion in the previous fiscal year. The company's fiscal year ends on Sept 30.

Also optimistic were the analysts.

Because of the robust growth of the global smartphone market, analysts on Wall Street set the one-year median price of Qualcomm at $74.50, an increase of more than 15 percent compared to its current price, said CNNMoney.com.

Peng from Canalys projected Qualcomm will remain in "a very strong position" in China as the penetration rate of third-generation telecommunications and more advanced 4G LTE technologies are set to grow.

"In addition, as more Chinese smartphone vendors are pushing their businesses overseas, Qualcomm is well placed in this trend," she said.