Qualcomm ( QCOM ), a leading CDMA chipset maker, sits at the center of a trend we see where traditional technology industry rivalries, such as AMD ( AMD ) vs. Intel ( INTC ) or AMD vs. nVidia ( NVDA ), are being overshadowed by the growing rivalry between mobile vs. PC.
In the mobile vs. PC debate, the main drivers to a company's value are: 1) the size of the addressable market - or its "market opportunity" (number of chips sold x average price), and 2) the company's market share.
We believe that prospects look brighter for companies in the mobile chipset business vs. those in the PC notebooks and desktop businesses, and we forecast that if Qualcomm can grow its market share to 75% from around 69% currently, this adds 11% to the current Trefis price estimate of $48.12 .
Rising CDMA Penetration A Key
Qualcomm's mobile chipset business is worth $35 billion, which is equal to 40% of Intel's notebook and desktop businesses combined and greater than our estimated values of nVidia and AMD combined - worth $6.7 and $5.6 billion respectively.
Rising penetration of phones using CDMA technology, largely driven by emerging markets demand, is helping buoy Qualcomm's business. Qualcomm currently makes CDMA and WCDMA chips for cell phones competing with Texas Instruments ( TXN ), Infineon (PINK:IFFNY) and Broadcom (BRCM).
We expect the number of CDMA chips sold to increase from 1.3 billion in 2010 to 1.8 billion by 2016, a 38% increase, and for pricing to stay relatively flat - from $16.30 to $15.30. This represents a 30% growth in market opportunity from $21 billion to nearly $28 billion.
CDMA Mobile Chipset Market Catches up to PC Market
The desktop business looks less attractive in the near term as we expect chip sales to increase from 136 million in 2010 to 139 million and for average prices to drop from $79.70 to $56.80 - a decrease in market opportunity of 27% from $10.8 billion to about $8 billion by 2016.
For notebooks, we expect chip sales to increase from 177 million to 260 million and average prices should drop sharply from $101 to $81.50. This translates to a gain in market opportunity from about $18 billion to $21 billion, representing a healthy 18% climb but still smaller in market size and growth rate than Qualcomm's mobile business.
This implies that the overall PC chipset market (desktops plus notebooks) is expected to remain about flat at around $29 billion over our forecast period while the mobile CDMA chipset market catches up, reaching $28 billion by the end of our forecast period.
Upside from Higher Qualcomm Chipset Market Share
If we assume Qualcomm can achieve 75% market share by 2016, similar to Intel's market share of PC chips, this adds 11% to the current price estimate. This would be a slight reversal from our current estimates and bring market share inline with 2007 levels. See our chart below.