What is Qualcomm?
Qualcomm is an American corporation that creates semiconductors, software, and services related to wireless technology. Similarly, the company owns patents to the 5G, 4G, TD-SCDMA, WCDMA, and CDMA2000 mobile communications standards. The company started its operations in 1985 through Irwin M. Jacobs and six other co-founders.
Qualcomm derives its name from “QUALity COMMunications”. The company started as a contract research and development centre, which worked through government and defense projects. Later, however, it expanded its operations into several ventures, including the semiconductor market. The company also merged with Omninet in 1988 and raised $3.5 million in funding. With that, it produced the Omnitracs satellite communications systems for trucking companies.
Omnitracs was the primary success source for the company. Due to the demand for this product, Qualcomm significantly increased in size and revenues over the years. Using the funds and revenues from Omnitracs, Qualcomm expanded its business into the research and development of CDMA technology. With these operations, Qualcomm expanded into the cell phone network sector.
However, the research and development process cost the company. Due to these operations, Qualcomm went into losses in the 1990s. The company filed an initial public offering to fund its operations in 1991. Through this offering, Qualcomm raised $68 million in finance. However, in 1995 the company raised $486 million in finance through shares.
Throughout the years, the company increased significantly in revenues. However, in 1998, Qualcomm restructured its business to spin-off its base station and cellphone manufacturing businesses. Through this process, the company focused its high-margin patents and chipset operations. This spin-off also helped the company convert its losses from the base station operation to profits.
Qualcomm continued its operations after that and generated billions in revenues. In 2005, the company expanded its operations into the Internet of Things (IoT) market. Throughout the years, Qualcomm has continued its operations in all its segments. Similarly, the company has made several investments into different markets, providing additional income.
What is Qualcomm’s Business Model?
Qualcomm uses a manufacturing business model through which the company produces several products. Similarly, its business model falls under a multi-product model. Through this model, Qualcomm manufactures various products and markets them separately. Of these products, the company is well-known for its cellular connectivity products. However, it also has operations in several other areas of invention.
Qualcomm is best-known for semiconductors. Among these, the most profitable and widely spread include its Snapdragon chipsets. These chipsets power top cellphones and provide impeccable performance. Some of the company’s top customers in this product line include Samsung, Xiaomi, LG, Sony, OnePlus, etc. However, these aren’t the only product that the company sells.
Qualcomm also provides cellular modems. Through these products, the company allows cellphones to connect to cellular networks and towers. These modems offer connectivity to all well-known technologies, including 2G, 3G, 4G, 5G and CDMA. Over the years, the company has also continued its research and development in these areas. This way, it has developed highly critical products for the cellphone market.
However, Qualcomm isn’t active in the mobile industry only. The company operates in laptop, automotive, wearable, audio and networking areas. On top of that, it is also active in the industrial IoT market and Virtual and Augmented Reality (VR and AR) markets. Apart from these, Qualcomm also has various other products. The company has continued its efforts to provide the best products for its customers.
One of the crucial success factors for Qualcomm in its business model has been research and development. The company operates in a market where this process is highly vital. Furthermore, Qualcomm has pioneered in this area. It has allowed it to stay ahead of its competitors. Despite that, Qualcomm has also faced significant competition and continues attracting more competitors.
Overall, Qualcomm’s business model allows the company to offer its products to a wide range of audiences. The company manufacturers various products which cater to different customer classes. This way, the company earned significant profits and generated billions in revenues. On top of that, Qualcomm also makes money from several sources. This way, it does not depend on a single market.
How does Qualcomm make money?
Qualcomm generated $33.57 billion in revenues in 2021. These revenues were the company’s highest till date, the second highest is $26.49 billion in 2014. Similarly, the company made $23.53 billion in revenues in 2020. Overall, the worldwide revenues, operating income and net income that the company generated over the years are as follows.
| Year | Revenues (in billions USD) | Operating Income (in millions USD) | Net Income (in millions USD) |
| 2012 | $ 19.12 | $ 5,682 | $ 6,109 |
| 2013 | $ 24.87 | $ 7,230 | $ 6,853 |
| 2014 | $ 26.49 | $ 7,550 | $ 7,967 |
| 2015 | $ 25.28 | $ 5,776 | $ 5,271 |
| 2016 | $ 23.55 | $ 6,495 | $ 5,705 |
| 2017 | $ 22.26 | $ 2,581 | $ 2,445 |
| 2018 | $ 22.61 | $ 621 | $ (4,964) |
| 2019 | $ 24.27 | $ 7,667 | $ 4,386 |
| 2020 | $ 23.53 | $ 6,255 | $ 5,198 |
| 2021 | $ 33.57 | $ 9,789 | $ 9,043 |
Overall, the company’s revenues incremented by 43% in 2021. However, it suffered a drop of 3% when its revenues fell from $24.27 billion to $23.53 billion. The company also experienced an increase in its operating and net income over the years. Therefore, Qualcomm had an overall successful year in financial performance.
Qualcomm makes money from two sources. The first includes its equipment and services, or QCT segment. Under this segment, the company offers its various products as mentioned above. The second consists of its licensing, or QCL segment. Within this segment, the company licenses its intellectual property. It includes patents and other rights. Similarly, the breakup of its revenues under these segments is as below.
| 2021 (in millions USD) | 2020 (in millions USD) | 2019 (in millions USD) | |
| Equipment and services | $ 26,741 | $ 16,298 | $ 14,611 |
| Licensing | $ 6,825 | $ 7,233 | $ 9,662 |
| Total revenues | $ 33,566 | $ 23,531 | $ 24,273 |
Given below is a description of these sources.
Equipment and services
Through the equipment and services segment, Qualcomm derives revenues from selling products and services. These items usually include chipsets sold to the wireless telecommunications industry. Within this segment, the company further segregates its revenues according to the type. This breakup consists of the following items.
| 2021 (in millions USD) | 2020 (in millions USD) | 2019 (in millions USD) | |
| Handsets | $ 16,830 | $ 10,461 | $ 9,793 |
| RFFE | $ 4,158 | $ 2,362 | $ 1,478 |
| Automotive | $ 975 | $ 644 | $ 640 |
| IoT (internet of things) | $ 5,056 | $ 3,026 | $ 2,728 |
| Total revenues | $ 27,019 | $ 16,493 | $ 14,639 |
Undoubtedly, Qualcomm’s highest earner is its handsets products and services. This segment includes revenues from products sold for use in mobile handsets. However, it does not consist of radiofrequency front-end products, which fall under its segment. The RFFE segment includes sales of 4G and 5G RFFE products. However, it excludes radio frequency transceiver components.
Qualcomm’s lowest earned is its automotive products and services. This segment includes revenues from products sold for use in automobiles, including telematics, connectivity and digital cockpit. Similarly, its second highest-earner is its internet of things segment. Within this segment, Qualcomm sells products in various industries and applications.
Licensing
As mentioned above, Qualcomm invests a significant value in its research and development. This way, the company has accumulated various patents and other intellectual properties. Qualcomm allows customers to license these technologies for work in their own areas. Through this process, the company earns revenues, as mentioned above.
Investments
Qualcomm is also active in the investments industry. The company invests in various strategic assets which earn money over the years. However, these investments do not generate a significant income for the company. The company also provides details of earnings from investments under the QSI segment. However, these revenues do not constitute a significant portion. Therefore, it only reports the above two segments.
Conclusion
Qualcomm is a well-known manufacturer of semiconductors in the worldwide market. The company also invests in research and development. Similarly, it holds a significant amount of intellectual property. Overall, the company operates in various markets. Therefore, has a complex business model. Qualcomm makes money from different market segments, as mentioned above.
