Qualcomm Appealing to Chinese Consumers' Aspirations

Before you go, we thought you'd like these...
Before you go close icon

Earlier this week, Qualcomm announced a low-end 64-bit smartphone applications processor integrated with an LTE baseband. The Snapdragon 410 is due out in the second half of next year, and is intended for sub-$150 smartphones. This chipset could make 4G data available to the masses, particularly in China, where the Chinese government recently began issuing 4G network licenses to the major carriers.

4G in China
China Mobile will roll out support for its new 4G LTE network next week. As a result, Apple's iPhone will finally be available to customers of the world's largest mobile carrier. Industry analysts estimate Apple could sell an additional 10 million iPhones annually due to the deal.

That doesn't sound like much, considering China Mobile has about 176 million 3G subscribers. There are several things that could hold the iPhone back in China. First, there's already a significant number of China Mobile subscribers using an iPhone. Second, the average Chinese consumer can't afford a high-end smartphone like the iPhone. And lastly, China Mobile's 4G rollout will take time, and will only be available in highly populated cities at first.

Qualcomm's low-end chipset aims to capitalize on the fact that China Mobile will likely expand its 4G network faster than the Chinese economy. By this time next year, 4G networks on China Mobile, and the other major carriers, will be expanding into smaller markets with lower average incomes. Qualcomm hopes to be as successful in capturing the low-end 4G market as it has on the high-end, where it accounts for 97% of the market.

Not without competition
Qualcomm isn't the only chipmaker that recognizes the opportunity in China. Broadcom's announced acquisition of Renesas Electronics in September means we should see integrated LTE chips from the company by next year.

Broadcom's earliest 4G integrated chipsets will be low-end products that will compete with the SnapDragon 410. In the second half of 2014, the company expects to ship a quad-core Cortex A7 with integrated LTE SoC. This ought to put the chipmaker behind Qualcomm in terms of performance, as the latter will utilize ARM's Cortex A53 and provide 64-bit processing. The A53 architecture is faster than the A7, which doesn't support 64-bit instruction sets.

Still, it's hard to imagine Qualcomm maintaining its 97% market share in the face of increased LTE competition. Not only is Broadcom entering the market, Intel , Marvell, NVIDIA, MediaTek, and Spreadtrum Communications will all release competitive LTE chips.

Intel is already shipping 64-bit cores, but with a lack of support from Android, they are effectively rendered 32-bit chips. Additionally, Intel won't have an LTE integrated chipset until 2015.

Keeping up with the Joneses
Qualcomm's forthcoming 64-bit chipset could appeal to aspirational consumers trying to keep up with Apple's 64-bit A7 chip. Although the chipset is slower than the high-end 32-bit chips, Qualcomm can play up the 64-bit aspect with manufacturers and consumers. As the iPhone gains traction in China with the roll out of 4G, a 64-bit processor with 4G may become an aspiration of many low-end consumers. Qualcomm can make that accessible.

More compelling ideas from the Motley Fool
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

The article Qualcomm Appealing to Chinese Consumers' Aspirations originally appeared on Fool.com.

Adam Levy owns shares of Apple. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple, China Mobile, Intel, and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

People are Reading