Porter’s Five Forces Analysis of Qualcomm
|Headquarters||San Diego, California, United States|
|CEOs||Cristiano R. Amon|
|Revenues||US$44.20billion,2022,FY Sep 25,2022
|Profit||US$12.93billion, 2022,FY Sep 25,2022
US$9.04 billion, 2021
|Competitors||Texas Instruments, Intel, Micron|
QUALCOMM, Inc is leading American firm operates in telecommunication products are serviceswith 5.8% of total global market share in semiconductor industry in Year 2022.The company has net assets of US$ 41.24 billion as of FY Sep,25 2022.The Company is founded by Irwin Mark Jacobs in July 1985.The Forbes Global 2000 ranked Qualcomm on201stin Year 2022.The Fortune 500 ranked Qualcomm on 107th respectively.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis of Qualcomm is used to determine the company’s competitive position reference to it’s Industry for better strategizing the companies’ operations for higher profits and less competition.
Qualcomm Rivalry among Existing Competitor
To understand competition in the Semiconductor market, it’s important to understand that the semiconductor industry is separated into three stages: design, fabrication, and assembly. Integrated device manufacturers are companies that accomplish all three of these stages, with Samsung and Intel acting as examples. Businesses that only create semiconductors, known as fabless enterprises, lack manufacturing infrastructure. Foundries are in charge of the actual production of semiconductors.
The Global Semiconductor Industry is standing generating revenues up to US$ 601.69 billion as of FY 2022 declared by Statista.
- Qualcomm Business – Segmentation:It is an American semiconductor corporation that develops processors, connectivity solutions, displays, software, and charging products, as well as designs, manufactures, and sells digital wireless telecommunications products and services. Qualcomm’s revenue in 2021 was US$33.6 billion, with sales in China alone accounting for more than US$22.5 billion.
Qualcomm has 2 major segmentation:
Equipment and Services which generated US$ 37.17 billion in FY 2022,while US$26.74 in FY 2021.Licensing generated US$ 7.02 billion in FY 2022,while US$ 6.8 billion in FY 2021.
Qualcomm Leadership:Qualcomm placed #1 among fabless IC firms in 2021, which are corporations that only develop semiconductors and outsource manufacture to contract chip makers, or foundries. Qualcomm is a significant consumer of both 5-nanometer and 7-nanometer wafers: 5nm CPUs are used in the most recent Smartphone devices, and Qualcomm is estimated to control around 30% of the Smartphone market by 2021.
Qualcomm Contribution: Qualcomm also makes significant contributions to wireless technology improvements and inventions, most notably 5G, Bluetooth, and Wi-Fi 6. Qualcomm, along with big firms like as Ericsson, Huawei, and Nokia, is recognized for its wireless technology technological advancements, and is one of the primary owners of 5G patents.
Qualcomm Revenue:Qualcomm revenue increased from US$14.96 billion in 2011 to US$33.57 billion in 2021 and then to US$44.20 billion in 2022; its compound annual growth rate is 10%, which is higher than the market growth rate of 4.40%, indicating that the company has experienced the highest growth among its competitors. Its net income for the previous three years was US$12.99 billion, US$9.04 billion, and US$5.19 billion in 2022, 2021, and 2020, respectively.
- Competition with Existing Rivalry Intel
The Global Semiconductor industry is leading by Samsung by generating a revenue of US$ 83.09 billion while the second leading company is Intel with a 2nd highest revenue generation of US$ 75.55 billion during 2021 declared by Statista.
The 3rd largest company is TSMC (Taiwan) by generating US$ 56.63 billion,4th largest SK Hynix (South Korea) US$ 37.27 billion ,the 5th largest is Micron (US) by generating US$ 30.09 billion while 6th largest Qualcomm (U.S) by generated US$29.14 billion during 2021 declared by Statista. (The Statista figures are based on Calendar Year)
Intel Corporation is a global corporation whose primary activity is the production of semiconductor chips. It is one of the world’s largest and most valuable semiconductor chip producers, with global annual sales of more than US$79 billion as of December 31st2021 declared by Intel Annual Report.
In this regard, the company introduced a new autonomous business unit, Intel Foundry Services (IFS), as well as a new US$1 billion fund in 2022 to support early-stage startups and established enterprises creating breakthrough technologies for the foundry ecosystem. Later in 2022, Intel announced the acquisition of Tower Semiconductor for US$5.4 billion in order to accelerate its foundry services business growth.
Intel sales increased from US$54.00 billion in 2011 to US$79.02 billion in 2021 before declining to US$63.05 billion in 2022, owing to the company’s limited presence in China, according to Intel. Its net income for the previous three years was US$8.01 billion, US$19.87 billion, and US$20.90 billion in 2022, 2021, and 2020, respectively.
- Competition with Existing Rivalry Texas Instruments:Texas Instruments Corporation deals in communication equipment’s and business applications. Its revenue climbs from US$13.74 billion in 2011 to US$18.34 billion in 2021 and US$20.03 billion in 2022, with net income of US$8.71 billion in 2022, US$7.74 billion in 2021, and US$5.57 billion in 2020, respectively. Its compound annual growth rate of 5% over the previous ten years is somewhat higher than the global semiconductor market growth rate of 4.40%.
- Micron:Micron Technologies is a semiconductor company based in the United States that is a global leader in memory and storage solutions. Micron’s sales in 2021 are expected to be US$27.7 billion. As it developed across data centers, intelligent edges, and consumer devices, Micron’s net income reached US$5.9 billion in 2021. Micron’s own products are manufactured in Taiwan, Singapore, Japan, the United States, Malaysia, and China.Micron placed fourth among semiconductor companies in 2021, below industry leaders such as Intel and Samsung. Micron has severe rivalry in the semiconductor memory and storage sectors from firms such as Kioxia, SK Hynix, Samsung, and Western Digital. Micron consistently ranks third among these companies in the global DRAM market, but its position in the global NAND market has varied around fifth.
Qualcomm Threat of New Entrants
- High spending on technology and innovation:Existing firms make significant investments in innovation, making it harder for new entrants to compete with highly imaginative businesses. In 2021, Qualcomm’s R&D investment will have topped US$7.2 billion as the company continues to develop in the wireless communications industry. Micron invested US$2.7 billion in R&D to fuel its expansion, particularly as it attempts to develop solutions for diverse memory architectures, materials, and packaging. Intel’s annual R&D spending has continually increased, with the company expected to spend US$15 billion in 2021 to retain its market position via the development of innovative products and services.
- Established since long: Most semiconductor companies have been in operation for a long time and have developed specialised expertise and staff, as well as access to modern manufacturing facilities. Many of these factors make it difficult for new entrants to establish themselves in the semiconductor sector. Qualcomm, Samsung, Intel, TSMC, SK Hynix, and Texas Instruments were all founded in 1985, 1938, 1968, 1987, 1949, and 1930.
Qualcomm Bargaining Power of Suppliers
- Industry Leadership:This is due to the fact that Qualcomm is an industry leader in the industry, and it has a strong brand presence and market share. Additionally, Qualcomm has established relationships with many key suppliers, which gives them leverage in negotiating for lower prices and better terms.
- Certification Requirements – Environmental Friendly Policies:All suppliers of Qualcomm are required to have ISO14001-certified especially for semiconductor related to environmental policies. For mitigating and evaluating water risk Qualcomm follows “World Resource Institute (WRI) Aqueduct” tool. Qualcomm is also a signatory of United Nations Global Compact.
- Efficient Supply Chain:Efficient Supply Chain is also very important in such operations Qualcomm’s Supply Chain Management System works with the guidelines provided by Organization for Economic Co-operation and Development (OECD)especially for minerals sourcing and mitigating Supply Chain risks.
Qualcomm Bargaining Power of Buyers
- The Market growth and maintaining its market share:In 2022, global semiconductor sales will total US$580.13 billion. Semiconductors are important components of electrical gadgets, and the industry is fiercely competitive. In 2022, the year-on-year growth rate was 4.4%. Qualcomm compound annual growth rate is 10%, which is higher than the market growth rate of 4.40%.
- Customer Brand Loyalty: The Customer Guru declares Net Promoter Score for Qualcomm is 9.This score describes the customer’s brand loyalty, association and recommendation.
- Qualcomm CDMA Technologies (QCT) – Customer Incentive Arrangements
Qualcomm arranged different volume based pricing discounts for it’s contractual customers which are either discount from revenue or accounts receivable in FY 2022.
- Concentrated Pool of Customers
For certain categories Qualcomm has customer concentration like QTL (Qualcomm Technology Licensing) with 10% or above of total revenue has been declared in the Annual Report.
Qualcomm Threat of Substitute Products or Services
- Hold different tiers of supply chain:In the first quarter of 2022, Taiwan Semiconductor Manufacturing Corporation (TSMC) owned slightly more than 53% of the global semiconductor foundry market, while Samsung had 16.3% if we consider the whole supply chain.
- Apple’s PC market share: Apple sold 17.2% of all PC units in the United States in the 4th quarter of 2022. Apple ranked third among suppliers in terms of PC shipments in the United States in the fourth quarter of 2022. Apple Mac computer sales generated around US$11.51 billion in revenue in the fourth quarter of Apple’s fiscal year 2022, up from US$9.18 billion the previous year. Qualcomm is Apple’s primary chip supplier, which gives Qualcomm an advantage.
- Reduction in demand of Intel CPUS:Intel was the first company to produce central processing units (CPUs). Yet, demand for CPUs has fallen dramatically in recent years. Intel intends to shift its focus to graphic processing units (GPUs). Intel’s net income in 2021 was US$19.87 billion, following the company’s downward trend that began in 2018, when its net income was US$21.05 billion. Intel just exceeded its third-quarter sales target, earning US$15.3 billion more than the predicted US$15.25 billion. They did fall short of projected earnings per share, producing US$0.25 vs an expected US$0.32, and sales for FY-2022 fell drastically from US$79.02 billion in 2021 to US$63.05 billion in 2022, although Intel noted that the reduction was attributable to its limited foothold in China.
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