But there were also defenders today. Longbow Research’s Joanne Feeney reiterates Buy ratings on Avago, RF Micro, and Skyworks, and a Nuetral rating on TriQuint.
Feeney thinks the Qualcomm part is too generic to pose a real threat:
QCOM’s new front-end module (FEM) provides an off-the-shelf solution for OEMs, but the generic nature of this device—and a number of technology shortcomings—will be very likely to limit adoption. QCOM’s solution is based on all-silicon (SOI or SiGe) technology whereas leading-edge PAs are GaAs-based because that material provides superior performance, so we suspect this solution would be adopted only in lower-end smartphones. The FEM can only perform as well as its worst component – so handset OEMs which emphasize performance will likely steer clear of this one. Superior performance claims likely reflect QCOM’s baseband and the integration of envelope tracking (ET) technology—but others will have ET-PAs at the same time. Sub-par filter technology: QCOM is using SAW filter technology and this underperforms FBAR/BAW on certain bands – particularly LTE bands. Once again, this points to QCOM’s RF360 being targeted at lower-end devices. Uniformity for OEMs: QCOM’s solution removes the ability of OEMs to differentiate handsets. Handsets will end up having the same performance specifications. This would undermine the ability of the OEMs to segment its own customer base into high-spending customers and low, and would remove the ability to differentiate from competitors. No customization and no second source.
And Lazard Capital Markets’s Ian Ing stakes out a middle ground. For him, Qualcomm’s product may not be about competing at all, but rather about protecting its baseband franchise:
One could argue that QCOM intends to gain handset content by entering the RF market (despite unattractive gross margins), which would be a negative for RF vendors. More likely, we would argue that Qualcomm has viewed “band fragmentation” as a threat to building single- platform world phones (QCOM’s default combo chip) as it opens the door for other modem suppliers with more limited solutions (such as BRCM, Mediatek, etc). Given that RF vendors are without an easy turnkey solution to support the 40 radio-bands in the world, QCOM may be attempting to push the RF IC vendors to better match the bar set by the QCOM RF360 solution. QCOM has ‘kick started’ markets before: We note QCOM will often enter, then exit, markets just to “kick start” them to better help its QCT and QTL model. Recall, it produced CDMA handsets in the mid-to-late 90s, and recently sold its stake at an Indian BWA carrier (JV with Bharti). These moves were not meant to become a Motorola or a Verizon, but to create better opportunities for QCT and QTL in the long run.
Ing maintains Buy ratings on Avago, Skyworks, and Qualcomm, and Neutral ratings on RF Micro and TriQuint.