Qualcomm’s (QCOM, Financial) stock is down over 40% since its all-time highs and the recent market correction has further added to the company’s plunge. Although Qualcomm has been treading downward for quite some time, I think the stock is ripe for a turnaround, as all the concerns are already baked in its current share price.
Snapdragon’s next generation 830 processor
According to an earlier report from Weibo, the company is going to introduce its latest next-generation Snapdragon 830 processor at the beginning of 2017.
The Snapdragon 830 processor is likely to be grounded on Samsung’s 10 nanometer chip manufacturing technology. According to the Samsung, this new chip based on 10-nanometer technology conveys area scaling of about 0.63 times equated to its previous generation 14-nanometer technology. Still, Samsung has not reported the performance of its 10-nanometer compared to its prior generation 14-nanometer technology.
This step towards next-generation chip manufacturing technologies usually conveys two things. First, the latest and new technology frequently comprise of improved transistors, the vital part of the chips. The improved transistors allow higher chip speeds and lower power depletion at a given level. Second is sectional density enhancements that offer the facility to pack more functionality into a particular section, like superior CPU cores, additional cache memory and more graphics processors.
If Qualcomm successfully ships its 10-nanometer product in high volume to its chief smartphone consumers, like Xiaomi, HTC (HTCCY, Financial), Samsung, and many others, at the high end of the mobile market, then all of those manufacturers could enjoy processor leadership over Apple (AAPL, Financial) up until the roll-out of the iPhone 7.
Qualcomm’s focus on data center
Qualcomm has been losing market share in mobile application processors (mainly due to Snapdragon 820 processor) and wireless modems to low-end competitors such as MediaTek over the previous year. Various key smartphone manufacturers also planned to make their own ARM-grounded CPUs as a replacement for buying Qualcomm’s Snapdragon processors. Because of this, Qualcomm’s chipmaking revenues and pre-tax earnings dropped 8% and 35% in FY 2015.
To move away from smartphones, the company is entering new markets with chips for various different type of devices such as cars, connected cameras, drones, and Internet of Things devices. Therefore, another prospective area of growth is the data-center market, which Intel governs with its x86 Xeon chips.
Qualcomm joined its data-center CPUs with Xilink's field-programmable gate arrays (FPGAs) to speed up workloads. Field-programmable gate arrays are different from traditional processors, as it can be reprogrammed, which makes them prevalent among industries that require chips for custom tasks.Ă‚
Conclusion
Due to the aforementioned factors, I think Qualcomm is ready to regain its lost ground. All the headwinds are already baked in Qualcomm’s current share price, and the risk/reward ratio is favorable.
