Can Qualcomm Find Success in $99 Smartphones?

The world’s emerging markets (e.g., parts of India, Africa, Asia) are a growth marketplace for phones. But it’s also a very cost sensitive marketplace, with many devices selling in the sub $100 price range given the limitations of many local economies. Obviously, at this price, the devices are not leading edge, thus limiting the amount of “smart” in the phones. They are often performance limited by the older networks connecting them (mostly 4G), and have minimal functionality that mature market users take for granted (e.g., high performance cameras, quality screens, graphics/video capabilities). The processors powering these devices are often at the very low end of the spectrum and often supplied by second tier vendors primarily concerned with creating the lowest cost designs and producing them in high volume.

With the launch of its lowest end of the Snapdragon mobile processor family, the Snapdragon 4S Gen 2, Qualcomm is creating a new entry price point for 5G enabled smartphones based on its technology. With the successful launch of many 5G networks in emerging markets where phone consumers remain very cost conscious, the need to provide smarter and more feature rich 5G connected devices has become critical. By doing some masterful cost cutting engineering work, Qualcomm has managed to create a processor that brings not only 5G modems to the entry level device, but also some impressive, albeit limited, performance to these devices for high quality screens and cameras not commonly found in entry level devices. While not alone in supplying processors to this space, Qualcomm is throwing down the gauntlet to its competitors in staking out a relatively high performance processor for low end products with this chip.

Based on imminent chip availability, devices in this class should be in market later this year. The primary target markets include India and parts of Africa, but we could see these low cost often less than $100 devices also appear in North America and other mature markets where they could be very attractive to prepaid consumers who are equally cost sensitive. While this segment is much smaller than the one for emerging markets, it is none the less important to many of the first tier service providers who would like to capture these starter customers. And it’s also important to many mass market retailers who are looking for a competitive performance to price advantage.

The Snapdragon 4S may also be attractive outside of the smartphone marketplace. As connected IoT devices become more common, often with complex and on-screen user interfaces, this chip with its 5G capability may offer a good solution for those connected products. Qualcomm does have a robust product set for IoT, and while this chip is not specifically targeted at this class of device, it none the less has some cross over capability that might be attractive to vendors, especially those who are already creating products powered by Snapdragon and who may want to leverage that existing expertise.

Bottom Line: Qualcomm has staked out a new area for its expanding presence in powering smartphones. On the one hand, it was forced into this position by the scale of entry level devices and by the emergence of low cost chip makers who are often promoted and/or subsidized by governments in emerging markets looking to foster home grown technology capability. Sooner or later these companies will move upstream to compete, and it’s better for Qualcomm to push back on them now. But this move also has the potential to add a high volume of chip sales to Qualcomm’s bottom line, hopefully at good margins, while also giving some of the premiere phone makers already employing Qualcomm chips a way to stay competitive at the lower end while maintaining a qualitative edge. All in all, this is a good move by Qualcomm in both protecting its position and expanding its market capability.

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Copyright 2024? J.Gold Associates, LLC.

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