Qualcomm’s alignment with latest developments in China via downsizing, Allwinner and Microsoft collaboration

July 22, 2015Qualcomm to cooperate with Microsoft, Allwinner for entry-level mobile device market by Digitimes Research

Qualcomm aims to ramp up its penetration in the entry-level mobile device market by cooperating with Microsoft to launch low-cost Windows Mobile 10 products, while also cooperating with Allwinner Technology to launch 3G/4G solutions for connected tablets, according to Digitimes Research.

Qualcomm accounted for about 80% of China’s 4G LTE solution market in 2014, but has seen its share decline significantly since the beginning of 2015 due to the roll-outs of competitive models from MediaTek and Spreadtrum Communications, and also due to Qualcomm’s own mishap in the deployment of mid-range and high-end solutions, Digitimes Research indicated.

To maintain its market share, Qualcomm’s cooperation with Microsoft aims to roll out Windows Mobile 10-based smartphones priced at about US$80 in the end-market, with the first wave of such models to be available in the fourth quarter of 2015.

The low-cost Windows Mobile 10-based models will utilize Qualcomm’s MSM8909 [Snapdragon 210] CPU, running on Windows Mobile platform but without the need of paying licensing fees to Microsoft, therefore, the overall cost of Windows Mobile10 smartphones will be comparable to entry-level Android phones.

Meanwhile, Allwinner will develop and offer total system solutions to support the development of cost-effective 4G LTE-enabled connected tablets based on Qualcomm’s Snapdragon family CPU products. Allwinner’s 4G solutions are for production of high-end tablets for mature market in the US and Europe, while the 3G solutions are for tablets targeting emerging markets.

July 23, 2015: a quote from Qualcomm Announces Record Third Quarter Fiscal 2014 Results Revenues $6.8 billion GAAP EPS $1.31, Non-GAAP EPS $1.44 press release by the company

China continues to present significant opportunities for us, particularly with the rollout of 4G LTE, but also presents significant challenges, as our business practices continue to be the subject of an investigation by the China National Development and Reform Commission (NDRC). Please refer to our Quarterly Report on Form 10-Q for the third quarter ended June 29, 2014 filed with the SEC for our most recent disclosures regarding the NDRC investigation.

We also believe that certain licensees in China currently are not fully complying with their contractual obligations to report their sales of licensed products to us (which includes certain licensees underreporting a portion of their 3G/4G device sales and a dispute with a licensee) and that unlicensed companies may seek to delay execution of new licenses while the NDRC investigation is ongoing. We expect calendar year 2014 3G/4G device shipments to be approximately 1.3 billion globally. However, our estimate of calendar year 2014 3G/4G device shipments that we currently expect to be reported to us is approximately 1.04 billion to 1.13 billion, which is adjusted for units that we believe may not be reported to us, are in dispute or are currently unlicensed. We are taking steps to address these issues, although the timing of any resolution is uncertain.

June 29, 2015: quote from Quarterly Report filed to SEC on Form 10-Q

Despite the resolution of the NDRC investigation, China continues to present significant challenges for us. We continue to believe that certain licensees in China are not fully complying with their contractual obligations to report their sales of licensed products to us (which includes 3G/4G units that we believe are not being reported by certain licensees). We continue to make progress, with licensees executing agreements based on the new China terms, and with several other licensees informing us that they intend to retain the terms of their existing agreements. Negotiations with certain other licensees are ongoing, and we expect it will take some time to conclude these negotiations. We believe that the conclusion of new agreements with these licensees will result in improved reporting by these licensees, including with respect to sales of three-mode devices (i.e., devices that implement GSM, TD-SCDMA, and LTE) sold in China. However, litigation and/or other actions may be necessary to compel licensees to report and pay the required royalties for sales they have not previously reported and to compel unlicensed companies to execute new licenses.

July 23, 2015Allwinner chosen to gain government support by DIGITIMES

China-based tablet SoC specialist Allwinner Technology has reportedly been selected as one of the target companies able to gain financial support from the central government, which has set up a national industry investment fund [the Rmb120 billion ($19.6 billion) National Integrated Circuit Industry Ivestment Found Ltd. 国家集成电路产业投资基金 set up on Oct 14, 2014 by the Chinese government and solely managed by Sino IC Capital] focusing on investing in the construction of advanced process capacity, semiconductor firm reorganization, and mergers.

Allwinner will use investment funds from the government to make itself more competitive, and contribute effectively to growth of the local IC industry and the self-sufficiency rate of ICs in China, said the sources.

With government support, Allwinner will also make strategic acquisitions locally and internationally, the sources indicated. Allwinner is likely to first merge with fellow company Rockchip Electronics to form a new, state-owned entity, which will gear up to tackle the market for IoT and wearable devices, the sources said.

Spreadtrum Communications was the first investment target chosen by the China government in the IC design industry. Spreadtrum is about to merge with RDA Microelectronics to establish a leading China-based SoC provider for smartphones as well as TVs, the sources noted.

July 22, 2015: Quotes from QUALCOMM (QCOM) Steven M. Mollenkopf on Q3 2015 Results – Earnings Call Transcript

  1. Full-time head count in QCT [Qualcomm CDMA Technologies] will be reduced by approximately 15%, which is in alignment with the overall company reductions. Our company resources are being realigned to our highest return businesses, and we’ll also make significant reductions in our temporary work force. Our team and organization will be streamlined. We will have fewer office locations overall, and we’ll shift some of our resources to lower-cost regions.
  2. We continue to see significant opportunities for growth in new areas outside of QTL [Qualcomm Technology Licensing] and QCT. While we are sharply focused on managing costs, we are not sacrificing the future for the present. We are taking a highly disciplined approach to our investments. We will invest in areas where we can apply our existing technology, such as small cells, or areas that are natural extensions of our capabilities, such as data centers.
  3. We have recently concluded the NDRC[China’s National Development and Reform Commission] investigation and announced several investments in China that position us well to grow our businesses in China going forward.
  4. With respect to the carrier aggregation question in China, China Telecom has already launched. It’s starting to work its way through the design cycle and through the ecosystem. China Mobile is expected to launch at the end of this calendar year. And we think this will be a good dynamic and has been anticipated in our roadmap, as you may know. The other dynamic that’s happening in China is just also is just the desire for the Chinese OEMs to be exporters, and that’s also been a good trend for us. But we’re looking forward to this carrier aggregation launch happening in China.
  5. We have identified networking, mobile computing, IoT, and automotive as the highest return areas and will focus our investments there. In fact, we continue to expand our investment in these growth areas. These areas have an addressable opportunity of more than $10 billion today. Based on a mix of third-party estimates and our own forecasts, the serviceable addressable opportunity for these four areas is expected to double by 2020 to more than $20 billion.
  6. The current industry environment has seen OEM share shift in the highly profitable premium tier, where the top player continues to take share and where, according to IDC, the top two manufacturers together now have more than 85% share of premium tier shipments. The current product cycle also has seen certain OEMs pursue vertically integrated strategies at increased levels compared to the past. These developments along with other product cycle issues are currently impacting our business.
  7. We are guiding to a 45 million unit sequential decline in MSM shipments. This decline is explained by two factors. First, our previous guidance expected MSMs to be down sequentially by 10 million to 15 million units in the fourth quarter. And the addition of 5 million units into the third fiscal quarter brings the anticipated impact closer to 20 million units. Second, the remaining approximately 25 million unit reduction is largely explained by the premium tier developments I explained a few minutes ago.

July 22, 2015: excerpt from the Third Quarter Fiscal 2015 Earnings Executive presentation
Qualcomm MSM Chip shipments -- 2011-12-13-14-15

June 2, 2015Qualcomm and Leading Tablet Solutions Provider Allwinner Technology to Collaborate in Growth of 4G LTE Tablets Powered by Qualcomm Snapdragon Processors news release by the company

—Allwinner to offer entry-level 4G LTE-enabled tablet system solutions based on Snapdragon 410 and 210 processors—

Qualcomm Technologies, Inc. (QTI), a subsidiary of Qualcomm Incorporated (NASDAQ: QCOM), and Allwinner Technology, Co. Ltd, today announced that they will be collaborating to further extend QTI’s Snapdragon processors into the connected tablet segment which is experiencing strong growth. QTI will be expanding its ability to serve the Chinese tablet design and manufacturing ecosystem by working with Allwinner, which will be offering system solution services for those OEMs and ODMs creating 4G LTE-enabled tablets powered by Qualcomm® Snapdragon™ 410 and 210 processors of QTI.

Allwinner, a China-based fabless semiconductor company and a leading provider of total system solutions for the Android tablet ecosystem, will support the quick and cost-effective development of 4G LTE-enabled tablets based on the aforementioned Snapdragon processors for domestic sales and export worldwide. Through the use of its established channel of support and services for the Chinese ecosystem of independent design houses, Allwinner will help expedite commercial deployment of high-quality, cost-effective 4G LTE-enabled tablets featuring QTI’s Snapdragon 410 and 210 processors.

Shared highlights of the Snapdragon 410 and 210 processors:

  • 4G LTE Global Mode, with 7 mode support (LTE FDD, LTE TDD, WCDMA, TD-SCDMA, EV-DO, CDMA 1x, GSM/EDGE)
  • LTE-Broadcast and Dual SIM technology
  • Superior camera capabilities and leading enhanced computational camera functionalities, including Zero Shutter Lag, high dynamic range (HDR), autofocus, auto white balance and auto exposure.
  • Support for the Android™ Lollipop mobile operating system
  • Support for QTI’s Qualcomm® Quick Charge™ 2.0 technology, which is designed to support up to 75% faster battery charging than devices without fast-charging technology.

The Snapdragon 410 processor is designed additionally to support features such as:

  • A quad-core ARM® Cortex™ A53 running up to 1.4 GHz per core and a Qualcomm® Adreno™ 306 GPU by QTI
  • Cat 4 speeds of up to 150 Mbps
  • Up to 13 Megapixel Camera
  • 1080p Full HD video playback at 1280×800 resolutions

The Snapdragon 210 [MSM8909] processor is designed to additionally support features such as: 

  • [up to 1.1 GHz quad-core ARM® Cortex™ A7 CPUs]
  • Integrated X5 modem, 4G LTE-Advanced Cat 4 Carrier Aggregation, LTE Broadcast and LTE Dual SIM/Dual Standby — all firsts in this category of products
  • Enhanced performance and power efficiency in the entry-level tier with quad CPUs and Qualcomm Adreno 304 graphics
  • Up to 8 Megapixel Camera
  • 720p HD playback and H.265 (hardware HEVC)

“Qualcomm Technologies’ industry leading Snapdragon processors, combined with Allwinner’s China tablet ecosystem relationships, represents a strong collaboration of proven industry leaders,” said Oliver Tang, executive vice president of Allwinner Technology Co. Ltd.  “We’re pleased to be working with Qualcomm Technologies to help drive further growth in connected tablets, and we expect to see a wave of high-volume, diversely designed, compellingly priced and high-quality 4G LTE-enabled tablets powered by Snapdragon processors in 2015.

“By working with Allwinner, we will be helping manufacturers to further utilize our industry leading processing and connectivity technologies to deliver high-quality consumer devices at great value,” said Cristiano Amon, executive vice president, Qualcomm Technologies, Inc., and co-president, QCT. “Our relationship with Allwinner will continue to help expedite the development and deployment of Snapdragon-enabled 4G LTE connected devices.”

February 9, 2015: Qoutes from Qualcomm and China’s National Development and Reform Commission Reach Resolution press release by the company

– NDRC Accepts Qualcomm’s Rectification Plan –

  • For licenses of Qualcomm’s 3G and 4G essential Chinese patents for branded devices sold for use in China, Qualcomm will charge royalties of 5% for 3G devices (including multimode 3G/4G devices) and 3.5% for 4G devices (including 3-mode LTE-TDD devices) that do not implement CDMA or WCDMA, in each case using a royalty base of 65% of the net selling price of the device.
  • Qualcomm will give its existing licensees an opportunity to elect to take the new terms for sales of branded devices for use in China as of January 1, 2015.

In addition, the NDRC imposed a fine on the Company of 6.088 billion Chinese Yuan Renminbi (approximately $975 million at current exchange rates), which Qualcomm will not contest. Qualcomm will pay the fine on a timely basis as required by the NDRC.

  • Expanding Qualcomm’s longstanding relationship with Semiconductor Manufacturing International Corporation (SMIC), one of China’s largest and most advanced semiconductor foundries, which has led to SMIC’s major milestone of producing high-performance, low-power mobile processors using cutting-edge advanced 28nm technology.
  • Creating a China-specific investment fund of $150 million to further the development of mobile and semiconductor technologies, including initial investments from the fund in five innovative Chinese companies.

February 25, 2015: Government-led investment funds to drive China IC design growth by Digitimes Research

China’s government policies for supporting the local IC design industry have put less emphasis on intervention measures such as offering tax breaks, providing direct financial support, and making purchases of domestic products, while shifting their focus to the establishment of investment funds, according to a recent Digitimes Research Special Report.

The report, titled 2015 China IC design market forecast, notes that investment funds will be set up by not only China’s central government, but also local governments, aiming to foster the development of the local IC design industry. The government-led funds will play an important role in driving the industry growth during the nation’s 13th Five-Year Plan period (2016-2020), Digitimes Research said.

The No. 18 Document of China’s State Council already gave strong support to IC companies with tax incentives, direct financial assistance and government purchases of domestic products, Digitimes Research suggested. Between 2001 and 2010, the number of China-based IC foundries grew to nine companies from four, while the number of IC design firms increased rapidly to 479 companies from 98.

The No. 4 Document announced by China’s State Council in 2011 showed that tax incentives awarded to the local IC companies have been narrowed significantly. The move indicates a change in government policies for supporting the local IC industry.

About Nacsa Sándor

Lazure Kft. • infokommunikációs felhő szakértés • high-tech marketing • elérhetőség: snacsa@live.com Okleveles villamos és automatizálási mérnök (1971) Munkahelyek: Microsoft, EMC, Compaq és Digital veterán. Korábban magyar cégek (GDS Szoftver, Computrend, SzáMOK, OLAJTERV). Jelenleg Lazure Kft. Amire szakmailag büszke vagyok (időrendben visszafelé): – Microsoft .NET 1.0 … .NET 3.5 és Visual Studio Team System bevezetések Magyarországon (2000 — 2008) – Digital Alpha technológia vezető adatközponti és vállalati szerver platformmá tétele (másokkal együttes csapat tagjaként) Magyarországon (1993 — 1998) – Koncepcionális modellezés (ma használatos elnevezéssel: domain-driven design) az objektum-orientált programozással kombinált módon (1985 — 1993) – Poszt-graduális képzés a miniszámítógépes szoftverfejlesztés, konkurrens (párhuzamos) programozás és más témákban (1973 — 1984) Az utóbbi időben általam művelt területek: ld. lazure2.wordpress.com (Experiencing the Cloud) – Predictive strategies based on the cyclical nature of the ICT development (also based on my previous findings during the period of 1978 — 1990) – User Experience Design for the Cloud – Marketing Communications based on the Cloud
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